Third Quarter Highlights:

• Net income of $83 million, or $1.57 per diluted share, up from $54 million or $1.01 per diluted share in Q3 2017

• Pre-tax income of $110 million, up from $87 million in Q3 2017

• SkyWest Airlines agreed to a multi-year extension with United Airlines for 60 CRJ-200s

• ExpressJet pilots approved new labor contract and SkyWest Airlines pilots approved a pay agreement amendment, further enhancing pilot career opportunities at both operating units

SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for Q3 2018, including net income of $83 million, or $1.57 per diluted share, compared to net income of $54 million, or $1.01 per diluted share for Q3 2017. Q3 2018 pre-tax income of $110 million increased 27% from Q3 2017, primarily due to SkyWest's ongoing fleet transition. Since Q3 2017, SkyWest added 34 new E175 aircraft and one new CRJ900 aircraft, and removed 65 older aircraft from its fleet.

Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said, "We are focused on remaining disciplined in delivering a product that meets the evolving needs of our customers. We expect the flying and labor agreements announced this quarter to contribute to our ongoing fleet transition and help position us well for current and future market opportunities. I am proud of the outstanding product our professionals consistently deliver to our customers."

Financial Highlights

Revenue was $829 million in Q3 2018, up from $813 million in Q3 2017. The increase in revenue included the net impact of adding 34 new E175 aircraft and other economic improvements within SkyWest's fleet mix since Q3 2017, partially offset by the removal of aircraft from unprofitable or less-profitable contracts over the same period.

Operating expenses were $691 million in Q3 2018, down from $700 million in Q3 2017. The decrease in operating expenses was primarily due to the reduction in direct operating costs from 30 fewer net aircraft in service since Q3 2017.

The tax rate for Q3 2018 was 24.5% compared to 38% in Q3 2017. The lower tax rate in Q3 2018 was primarily due to the reduced federal rate under the new tax law enacted in Q4 2017.

Operational Update

Flying contract extension
SkyWest Airlines announced today that it has agreed to a multi-year extension with United Airlines ("United") for 60 CRJ-200s currently under a capacity purchase agreement. These 60 aircraft originally had various contract maturities over the next few years.

Deliveries under previously announced agreements
SkyWest Airlines took delivery of 12 new E175 aircraft during Q3 2018 and is scheduled to take delivery of eight new E175 aircraft during Q4 2018. SkyWest Airlines expects to have 146 E175 aircraft in its fleet by the end of 2018.

SkyWest Airlines also took delivery of one CRJ900 aircraft during Q3 2018 under a previously announced agreement with Delta for 20 new CRJ900s. Under this agreement, Delta will finance the 20 aircraft and SkyWest Airlines will operate these aircraft for a nine-year term. SkyWest Airlines anticipates taking delivery of four CRJ900s in Q4 2018 and the remaining 15 CRJ900s between Q1 2019 and mid-2020 under this agreement. SkyWest expects to remove 20 CRJ700s from contracts with Delta as each of these 20 CRJ900s are placed into service.

CRJ700 aircraft in transition
During Q3 2018, SkyWest Airlines placed four used CRJ700s into service under a previously announced agreement for 20 aircraft with American Airlines ("American"). These CRJ700s will be sourced from within SkyWest's existing fleet through other contract expirations and all 20 aircraft are scheduled to be in service with American by early 2019.

ExpressJet continued the previously-announced wind down of its flying agreement with Delta during the quarter. At the end of Q3 2018, ExpressJet had 12 CRJ700s in service under its Delta agreement and expects its contract with Delta will terminate by the end of 2018. Also, at the end of Q3 2018, ExpressJet had 16 CRJ700 aircraft in service under its contract with American and expects its contract with American will terminate by early 2019.

ExpressJet is currently operating 12 CRJ700s that are expected to be removed from service and returned to lessors by mid-2019. SkyWest also anticipates it will remove 30 owned CRJ700s from flying contracts from early to mid-2019 and as previously announced is pursuing alternative opportunities to utilize these aircraft in 2019.

CRJ200 aircraft in transition
During Q3 2018, ExpressJet began the transition for 20 CRJ200 aircraft to be placed into service under a previously announced three-year agreement with United Airlines ("United"). The aircraft will be sourced from within SkyWest's existing fleet through other contract expirations. The first aircraft was placed into service in October 2018 and all 20 CRJ200 aircraft are scheduled to be placed into service with United by early 2019.

New pilot agreements
During Q3 2018, ExpressJet pilots voted in favor of a new three-year pay agreement effective through October 2021. Separately, in October 2018 SkyWest Airlines pilots voted in favor of a new four-year pay agreement effective through December 2022. The financial terms of these agreements were not disclosed, but each agreement provides additional compensation to the respective pilot groups, and will allow each operating entity to provide outstanding career opportunities for pilots. These multi-year contracts provide better visibility to pursue current and future market opportunities.

Capital and Liquidity

SkyWest had $705 million in cash and marketable securities at September 30, 2018, up from $649 million at June 30, 2018. During the third quarter of 2018, SkyWest:

Used $43 million toward the purchase of 12 E175 aircraft
Used $15 million to repurchase stock under its $100 million share repurchase program, of which $55 million remains authorized
Used $30 million for other capital investments, primarily related to aircraft parts and maintenance assets
Total debt at September 30, 2018 was $3.1 billion, up $140 million from June 30, 2018, which included debt issued for 12 E175 aircraft acquired during the quarter, partially offset by scheduled principal payments.