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Nature of Operations and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2020
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 subsidiary, SkyWest Airlines, Inc. (“SkyWest Airlines”) operates the largest regional airline in the United States. On January 22, 2019, the Company completed the sale of its former wholly owned subsidiary, ExpressJet Airlines, Inc. (“ExpressJet”). As of December 31, 2020, SkyWest Airlines offered scheduled passenger service under code-share agreements with Delta Air Lines, Inc. (“Delta”), United Airlines, Inc. (“United”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) with approximately 1,770 total daily departures to 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, 2020, the Company had 601 total aircraft in its fleet, including 452 aircraft in scheduled service under its code-share agreements, summarized as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | CRJ200 |  | CRJ700 |  | CRJ900 |  | E175 |  | Total |
Delta |  | 26 | ​ | 6 | ​ | 39 | ​ | 71 | ​ | 142 | ​
United |  | 104 | ​ | 19 | ​ | — | ​ | 90 | ​ | 213 | ​
American |  | — | ​ | 65 | ​ | — | ​ | — | ​ | 65 | ​
Alaska |  | — | ​ | — | ​ | — | ​ | 32 | ​ | 32 | ​
Aircraft in scheduled service | ​ | 130 | ​ | 90 | ​ | 39 | ​ | 193 | ​ | 452 | ​
Leased to third parties |  | 2 | ​ | 34 | ​ | 5 | ​ | — | ​ | 41 | ​
Other* |  | 74 | ​ | 30 | ​ | 4 | ​ | — | ​ | 108 | ​
Total Fleet |  | 206 | ​ | 154 | ​ | 48 | ​ | 193 | ​ | 601 | ​
*As of December 31, 2020, these aircraft have been removed from service and are in the process of being placed under a leasing arrangement with a third party, are aircraft transitioning between code-share agreements with the Company’s major airline partners and being used as a supplemental spare aircraft, or are in the process of being parted out. For the year ended December 31, 2020, approximately 47.1% of the Company’s aircraft in scheduled service operated for United, approximately 31.4% was operated for Delta, approximately 14.4% was operated for American and approximately 7.1% 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, 2020, SkyWest Airlines operated as a Delta Connection carrier primarily in Salt Lake City, Detroit 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, Dallas, Los Angeles and Phoenix and an Alaska carrier primarily in the Pacific Northwest. SkyWest Airlines operates the following aircraft manufactured by Bombardier Aerospace (“Bombardier”): CRJ200s, CRJ700s and CRJ900s, and E175s manufactured by Embraer S.A. (“Embraer”). The CRJ200 is a single-class 50-seat aircraft. The CRJ700, CRJ900 and E175 aircraft have a dual-class seat configuration typically configured with 65 to 76 seats. Basis of Presentation The Company’s consolidated financial statements include the accounts of the Company and the SkyWest Airlines, ExpressJet (for the periods owned by the Company) 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, 2020, through the filing date of the Company’s annual report with the U.S. Securities and Exchange Commission. 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 had no restricted cash as of December 31, 2020 and 2019. Marketable Securities The Company’s investments in debt securities are classified as available-for-sale and are reported at fair market value with the net unrealized appreciation 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. At December 31, 2020 and 2019, the fair market value of the available-for-sale securities was the amortized cost. The Company’s position in marketable securities as of December 31, 2020 and 2019 was as follows (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Gross unrealized | ​ | Gross unrealized | ​ | ​ | ​ | ​
At December 31, 2020 |  | Amortized Cost |  | holding gains |  | holding losses |  | Fair market value |
Total cash and cash equivalents | ​ | $ | 215,723 | ​ | $ | — | ​ | $ | — | ​ | $ | 215,723 | ​
Marketable securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Bond and bond funds | ​ | $ | 117,928 | ​ | $ | — | ​ | $ | — | ​ | $ | 117,928 | ​
Commercial Paper | ​ |  | 492,257 | ​ |  | — | ​ |  | — | ​ |  | 492,257 | ​
Total marketable securities | ​ | $ | 610,185 | ​ | $ | — | ​ | $ | — | ​ | $ | 610,185 | ​
Total assets measured at fair value | ​ | $ | 825,908 | ​ | $ | — | ​ | $ | — | ​ | $ | 825,908 | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Gross unrealized | ​ | ​ | Gross unrealized | ​ | ​ | ​ | ​
At December 31, 2019 |  | Amortized Cost |  | holding gains |  | holding losses |  | Fair market value |
Total cash and cash equivalents | ​ | $ | 87,206 | ​ | $ | — | ​ | $ | — | ​ | $ | 87,206 | ​
Marketable securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Bond and bond funds | ​ | $ | 267,243 | ​ | $ | — | ​ | $ | — | ​ | $ | 267,243 | ​
Commercial Paper | ​ |  | 165,723 | ​ |  | — | ​ |  | — | ​ |  | 165,723 | ​
Total marketable securities | ​ | $ | 432,966 | ​ | $ | — | ​ | $ | — | ​ | $ | 432,966 | ​
Total assets measured at fair value | ​ | $ | 520,172 | ​ | $ | — | ​ | $ | — | ​ | $ | 520,172 | ​
​ As of December 31, 2020 and 2019, the Company had classified $610.2 million and $433.0 million of marketable securities, respectively, as short-term since it had the ability to redeem the securities within one year. 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, 2020 and 2019 was $19.7 million and $15.9 million, respectively. 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 | ​ | Current Residual Value | ​
Aircraft, rotable spares, and spare engines | ​ | up to 22 years |  | up to 20 | % | ​
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, 2020, the Company had approximately $5.4 billion of property and equipment and related 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. 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. The Company did not recognize any impairment charges of long-lived assets during the years ended December 31, 2020, 2019 and 2018. 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, 2020, 2019 and 2018, the Company capitalized interest costs of approximately $1.7 million, $1.6 million, and $1.5 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 most of its 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 other recurring maintenance are expensed as incurred. During the year ended December 31, 2020, the Company wrote-off $3.7 million of long-lived maintenance assets at maintenance locations the Company vacated during the year. Flying Agreements and Airport Customer Service and Other Revenues The Company recognizes flying agreements revenue and airport customer service and other revenues when the service is provided under its code-share agreements. Under the Company’s fixed-fee arrangements (referred to as “capacity purchase agreements”, “fixed-fee arrangements,” or “fixed-fee contracts”) 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 hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi 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 pays for or reimburses the Company for certain direct expenses incurred under the capacity purchase arrangement, such as fuel, airport landing fees and airport rents. Under the capacity purchase arrangements, the Company’s performance obligation is met and revenue is recognized when each flight is completed, measured in completed block hours, and is reflected in flying agreements revenue. The transaction price for the capacity purchase agreements is determined from the fixed-fee consideration, incentive consideration and directly reimbursed expenses earned as flights are completed over the agreement term. For the year ended December 31, 2020, capacity purchase arrangements represented approximately 87.0% of the Company’s flying agreements revenue. Under the Company’s prorate arrangements (referred to as a “prorate” or “revenue-sharing” arrangement), the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a Company airline and the other portion of their trip on the major airline partner. Under the Company’s prorate flying agreements, the performance obligation is met and revenue is recognized 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. The transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket amount on each completed flight over the agreement term. For the year ended December 31, 2020, prorate flying arrangements represented approximately 13.0% of the Company’s flying agreements revenue. Lease, airport services and other revenues primarily consist of ground handling functions, such as gate and ramp agent services at applicable airports where the Company provides such services. The transaction price for airport customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of flights handled by the Company over the agreement term. Additionally, airport customer service and other revenues includes revenue generated from aircraft and spare engines leased to third parties. Of the Company’s $5.4 billion of property and equipment, net as of December 31, 2020, $271.1 million of regional jet aircraft and spare engines were leased to third parties under operating leases. The Company mitigates the residual asset risks of these assets by leasing aircraft and engine types that can be operated by the Company in the event of a default. A portion of the Company’s leases to third parties contain variable payments from lessees based on departures where the Company pays for maintenance. Additionally, the operating leases typically have specified lease return condition requirements paid by the lessee to the Company and the Company typically maintains inspection rights under the leases. ​ The following table represents the Company’s flying agreements revenue by type for the years ended December 31, 2020, 2019 and 2018 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the year ended December 31,
​ |  | 2020 |  | 2019 |  | 2018
Capacity purchase agreements revenue: flight operations | ​ | $ | 945,008 | ​ | $ | 1,538,062 | ​ | $ | 1,856,253
Capacity purchase agreements revenue: aircraft lease | ​ |  | 846,933 | ​ |  | 830,247 | ​ |  | 814,518
Prorate agreements revenue | ​ |  | 268,860 | ​ |  | 520,956 | ​ |  | 498,749
Flying agreements revenue | ​ | $ | 2,060,801 | ​ | $ | 2,889,265 | ​ | $ | 3,169,520
​ A portion of the Company’s compensation under its capacity purchase agreements is designed to reimburse the Company for certain aircraft ownership costs. The consideration for aircraft ownership costs 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. The consideration received for the use of the aircraft under the Company’s capacity purchase agreements is reflected as lease revenue, inasmuch as the agreements identify the “right of use” of a specific type and number of aircraft over a stated period of time. The lease revenue associated with the Company’s capacity purchase agreements is accounted for as an operating lease and is reflected as flying agreements revenue on the Company’s consolidated statements of comprehensive income. The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive income since the use of the aircraft is not a separate activity of the total service provided. Under the Company’s capacity purchase agreements, the Company is paid a fixed amount per month per aircraft over the contract term. The Company recognizes revenue attributed to the Fixed Monthly Payments proportionate to the number of block hours complete during each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. Due to the material decrease in completed block hours in 2020 from historical levels and from anticipated future levels over the remaining contract terms, the Company determined the amount of Fixed Monthly Payments received in 2020 was disproportionately high relative to the number of block hours completed during 2020. The Company anticipates the future number of block hours it will complete over the remaining capacity purchase agreements will significantly increase from 2020 levels. Accordingly, the Company deferred recognizing revenue of $110.7 million of fixed monthly cash payments the Company received under its capacity purchase agreements during 2020. The Company’s deferred revenue related to the fixed payments will adjust over the remaining contract term for each capacity purchase agreement based on the number of block hours it completes each reporting period relative to the number of block hours it anticipates completing over the remaining contract term of each capacity purchase agreement. The Company’s capacity purchase and prorate agreements include weekly provisional cash payments from the respective major airline partner based on a projected level of flying each month. The Company and each major airline partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis. ​ In the event a flying agreement includes a mid-term rate reset to adjust rates prospectively and the contractual rates under the Company’s flying agreements have not been finalized at quarterly or annual financial statement dates, the Company applies the variable constraint guidance under Topic 606, where the Company records revenue to the extent it believes that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. ​ In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the achievement of certain performance criteria. The incentives are defined in the agreements and are measured and determined on a monthly, quarterly or semi-annual basis. At the end of each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to that agreement accordingly, subject to the variable constraint guidance under Topic 606. The following summarizes the significant provisions of each code-share agreement the Company has with each major airline partner through SkyWest Airlines: Delta Connection Agreements
Agreement |  | Aircraft type | ​ | Number of Aircraft |  | Term / Termination Dates |
Delta Connection Agreement (capacity purchase arrangement) | ​ | ● E175 ● CRJ 900 ● CRJ 700 | ​ | 71 39 6 | ​ | ● Individual aircraft have scheduled removal dates from 2021 to 2030 ● The average remaining term of the aircraft under contract is 5.7 years | ​
Delta Connection Prorate Agreement (prorate arrangement) | ​ | ● CRJ 200 | ​ | 26 | ​ | ● Terminable with 30-day notice | ​
​ United Express Agreements
|  |  | ​ |  |  |  |
--- | --- | --- | --- | --- | --- | --- | ---
Agreement |  | Aircraft type | ​ | Number of Aircraft |  | Term / Termination Dates |
United Express Agreements (capacity purchase arrangement) | ​ | ● E175 ● CRJ 700 ● CRJ 200 | ​ | 90 19 70 ​ | ​ | ● Individual aircraft have scheduled removal dates under the agreement between 2022 and 2029 ● The average remaining term of the aircraft under contract is 4.9 years | ​
United Express Prorate Agreement (prorate arrangement) | ​ | ● CRJ 200 ​ | ​ | 34 | ​ | ● Terminable with 120-day notice | ​
​ American Capacity Purchase Agreement
| ​ |  | ​ | ​ | ​ |  | ​
Agreement |  | Aircraft type | ​ | Number of Aircraft |  | Term / Termination Dates |
American Agreement (capacity purchase arrangement) | ​ | ● CRJ 700 ​ | ​ | 65 | ​ | ● Individual aircraft have scheduled removal dates from 2022 to 2026 ● The average remaining term of the aircraft under contract is 3.3 years | ​
​ Alaska Capacity Purchase Agreement
| ​ |  | ​ | ​ | ​ |  | ​
| ​ |  | ​ | ​ | ​ |  | ​
Agreement |  | Aircraft type | ​ | Number of Aircraft |  | Term / Termination Dates |
Alaska Agreement (capacity purchase arrangement) | ​ | ● E175 ​ | ​ | 32 | ​ | ● Individual aircraft have scheduled removal dates from 2027 to 2030 ● The average remaining term of the aircraft under contract is 8.2 years | ​
​ In addition to the contractual arrangements described above, as of December 31, 2020, SkyWest Airlines entered into a capacity purchase agreement with American to place 20 E175 aircraft into service. The delivery dates for the 20 new E175 aircraft are currently scheduled for 2021 and 2022 and the aircraft are expected to be placed into service in 2022. SkyWest Airlines also entered into an agreement with American to place 25 used CRJ700s under a multi-year capacity purchase agreement beginning in 2021. Final delivery dates may be adjusted based on various factors. ​ SkyWest Airlines also entered into an agreement with Delta to place one CRJ900 aircraft under a capacity purchase agreement in 2021. The Company anticipates Delta will acquire the aircraft and SkyWest operate the aircraft. ​ When an aircraft is scheduled to be removed from a capacity purchase arrangement, the Company may, as practical under the circumstances, negotiate an extension with the respective major airline partner, negotiate the placement of the aircraft with another major airline partner, return the aircraft to the lessor if the aircraft is leased and the lease is expiring, place owned aircraft for sale, or pursue other uses for the aircraft. Other uses for the aircraft may include placing the aircraft in a prorate arrangement, leasing the aircraft to a third party or parting out the aircraft to use the engines and parts as spare inventory or to lease the engines to a third party. ​ The following table represents the Company’s lease, airport services and other revenues for the years ended December 31, 2020, 2019 and 2018 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the year ended December 31,
​ |  | 2020 |  | 2019 |  | 2018
Airport customer service and other revenue | ​ | $ | 25,804 | ​ | $ | 45,538 | ​ | $ | 48,236
Operating lease income relating to lease payments | ​ |  | 34,791 | ​ |  | 27,552 | ​ |  | 3,923
Operating lease income relating to variable lease payments | ​ |  | 5,710 | ​ |  | 9,608 | ​ |  | —
Lease, airport services and other | ​ | $ | 66,305 | ​ | $ | 82,698 | ​ | $ | 52,159
The following table summarizes future minimum rental income under operating leases primarily related to leased aircraft that had remaining non-cancelable lease terms as of December 31, 2020 (in thousands):
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
2021 |  | $ | 43,573 |
2022 | ​ |  | 43,390 | ​
2023 | ​ |  | 42,837 | ​
2024 | ​ |  | 42,530 | ​
2025 | ​ |  | 39,082 | ​
Thereafter | ​ |  | 155,089 | ​
​ | ​ | $ | 366,501 | ​
​ The Company’s operating revenues could be impacted by a number of factors, including changes to the Company’s code-share agreements with its major airline partners, changes in flight schedules, contract modifications resulting from contract renegotiations, 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. ​ 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. ​ As of December 31, 2020, the Company had $34.5 million in accounts receivable of which $27.5 million related to flying agreements. As of December 31, 2019, the Company had $83.0 million in accounts receivable of which $58.8 million related to flying agreements. ​ Allowance for Credit Losses The Company monitors publicly available credit ratings for entities for which the Company has a significant receivable balance. As of December 31, 2020, the Company had gross receivables of $56.1 million in current assets and gross receivables of $157.4 million in other long-term assets. The Company has established credit loss reserves based on publicly available historic default rates issued by a third party for companies with similar credit ratings, factoring in the term of the respective accounts receivable or note receivable. During the twelve months ended December 31, 2020, the collectability on a note receivable from Kair Enterprises, Inc. associated with the Company’s sale of ExpressJet in 2019 became uncertain due to ExpressJet ceasing operations during the year and the credit ratings were lowered on certain entities for which the Company has outstanding accounts receivable or notes receivable, which were the primary drivers for the increase in the Company’s credit loss reserve when benchmarked against historic default rates as of January 1, 2020, when the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” (“Topic 326”). The following table summarizes the changes in allowance for credit losses:
​ | ​ | ​ | ​
​ |  | Allowance for Credit Losses
Balance at January 1, 2020 | ​ | $ | 15,388
Additions to credit loss reserves | ​ |  | 30,837
Write-offs charged against allowance | ​ |  | —
Balance at December 31, 2020 | ​ | $ | 46,225
​ Income Taxes The Company recognizes a net 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 by the weighted average number of common shares outstanding during the period. Diluted net income 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 year ended December 31, 2020, 1,074,375 shares reserved for the issuance of employee equity awards and warrants to acquire the Company’s common stock were excluded in the computation of Diluted EPS since the Company reported a net loss for the year ended December 31, 2020. During the year ended December 31, 2019, 150,000 performance share units (at target performance) were excluded in the computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of December 31, 2019. During the year ended December 31, 2018, 207,000 performance share units (at target performance) were excluded in the computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of December 31, 2018. 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, 2020, 2019 and 2018 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
​ | ​ | 2020 | ​ | 2019 | ​ | 2018 |
Numerator: |  | ​ |  |  | ​ |  |  | ​ |  | ​
Net income (loss) | ​ | $ | (8,515) | ​ | $ | 340,099 | ​ | $ | 280,372 | ​
Denominator: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic earnings per share weighted average shares | ​ |  | 50,195 | ​ |  | 50,932 | ​ |  | 51,914 | ​
Dilution due to stock options and restricted stock units | ​ |  | — | ​ |  | 443 | ​ |  | 957 | ​
Diluted earnings per share weighted average shares | ​ |  | 50,195 | ​ |  | 51,375 | ​ |  | 52,871 | ​
Basic earnings (loss) per share | ​ | $ | (0.17) | ​ | $ | 6.68 | ​ | $ | 5.40 | ​
Diluted earnings (loss) per share | ​ | $ | (0.17) | ​ | $ | 6.62 | ​ | $ | 5.30 | ​
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 on marketable debt securities. 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. 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 $3,244.0 million as of December 31, 2020, as compared to the carrying amount of $3,236.0 million as of December 31, 2020. The Company’s fair value of long-term debt as of December 31, 2019 was $3,049.1 million as compared to the carrying amount of $3,017.5 million as of December 31, 2019. 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 (prior to the sale of ExpressJet in January 2019) consist of the operations conducted by SkyWest Airlines, ExpressJet (for the periods owned by the Company) and SkyWest Leasing. Following the sale of ExpressJet, the Company has two reportable segments: SkyWest Airlines and SkyWest Leasing. Information pertaining to the Company’s reportable segments is presented in Note 3, Segment Reporting. ​ Recent Accounting Pronouncements Recently Adopted Standards In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” (“Topic 326”), which requires measurement and recognition of expected credit losses for financial assets held and requires enhanced disclosure regarding significant estimates and judgments used in estimating credit losses. Topic 326 is effective for the Company beginning January 1, 2020. The Company adopted Topic 326 on January 1, 2020. The Company’s primary financial assets as of December 31, 2019 included trade receivables from its flying agreements, a note receivable from the sale of ExpressJet, and receivables from aircraft manufacturers and other third parties in the airline industry. The Company recorded a credit loss of $11.6 million net of income tax in conjunction with the adoption of Topic 326. The Company recorded this credit loss as a January 1, 2020 beginning balance sheet entry to retained earnings (net of income tax). See Note 1, “Flying Agreements Revenue and Lease, Airport Services and Other Revenues,” for more information on the application of Topic 326 on the Company’s results for 2020.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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