SkyWest, Inc. (SKYW) Q3 2026 Earnings Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the SkyWest, Inc. Third Quarter 2026 Results Call. [Operator Instructions] I will now hand the conference over to Rob Simmons, Chief Financial Officer. Please go ahead.

Robert Simmons: Thanks, everyone, for joining us on the call today. As the operator indicated, this is Rob Simmons, SkyWest's Chief Financial Officer. On the call with me today are Chip Childs, President and Chief Executive Officer; Wade Steele, SkyWest Airlines' President and Chief Operating Officer; and Eric Woodward, Chief Accounting Officer. I'd like to start today by asking Eric to read the safe harbor, then I will turn the time over to Chip for some comments. Following Chip, I will take us through the financial results, then Wade will discuss the fleet and related flying arrangements. Following Wade, we will have the customary Q&A session with our sell-side analysts. Eric?

Eric Woodward: Today's discussion contains forward-looking statements that represent our current beliefs, expectations and assumptions regarding future events and are subject to risks and uncertainties. We assume no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Actual results will likely vary and may vary materially from those anticipated, estimated or projected for a number of reasons. Some of the factors that may cause such differences are included in our most recent Form 10-K and other reports and filings with the Securities and Exchange Commission. And now I'll turn the call over to Chip.

Russell A. Childs: Thank you, Rob and Eric. Good afternoon, everyone, and thank you again for joining us on the call today. Today, SkyWest reported net income of $120 million or $3.08 per diluted share for the third quarter of 2026. The third quarter's results include increased block hours and were affected by higher fuel costs impacting our prorate business. During the quarter, our people delivered 99.9% adjusted completion on over 230,000 flights. We were consistently a top three on-time carrier on the DOT's consumer reports, and this is only possible with the teamwork of our more than 16,000 professionals. I again want to thank them for their great work through the quarter. We are consistently disciplined as we execute on our long-term business plans. In recent years, we have strategically positioned our company to withstand unexpected headwinds like the fuel volatility we are experiencing. Specifically, we have, one, delevered our balance sheet. We continued to reduce our debt, and we now have $1 billion less debt than we did at the end of 2022. Overall, our debt ratios and leverage metrics are among the best in the industry. Second, we've invested in the fleet and continue to do so. During the third quarter, we took delivery of four new E175 aircraft for United. From Q4 through the end of 2028, we will take delivery of at least 30 new E175s, putting us over 300 in our fleet. Our model allows us to continue investing strategically in both the new E175 fleet and conversions of our CRJ fleet, including the new CRJ450, which will be placed into service later this year. With these transitions, we look forward to ultimately operating an all dual-class fleet. And third, we returned capital to our shareholders through our stock repurchase program. The resilience of our model is based on improving the cash flow quality of our earnings and strategically deploying our capital, not just against production metrics, but against value creation. We believe we are in an important window to continue to invest in our fleet, including the new E175 in our order book under contract as well as the 33 delivery slots beginning in 2027 for future opportunities. We're also positioned to continue to invest in CRJ550 and 450 conversions, CRJ heavy maintenance and pilot training. We believe the investments we're making today will deliver economic benefits in 2028. Our approach to capital deployment, as always, will reflect our view of the best long game strategy for our shareholders, our employees and our partners. As the industry evaluates capacity in 2027 and beyond, we're in the best position to respond to market demands and our partners' needs in a dynamic environment. Overall, our disciplined strategic choices and continued execution have strengthened our model. We remain engaged with our partners on navigating the headwinds of our industry better than anyone else. Rob will now take us through the financial data.

Robert Simmons: Today, we reported a third quarter GAAP net income of $120 million or $3.08 earnings per share. Q3 pretax income was $159 million, up 15% sequentially from Q2. Our weighted average share count for Q3 was 38.8 million, and our effective tax rate was 25%. Total Q3 revenue of $1.1 billion is up 6% from $1 billion in Q3 2025 on block hour demand from our partners and is up 1% sequentially from Q2 2026. Q3 revenue includes contract revenue of $866 million, prorate and charter revenue of $218 million and leasing and other revenue was $33 million. These Q3 GAAP results include the effect of recognizing $23 million of previously deferred revenue this quarter, up from the $17 million recognized in Q3 2025 and down from $27 million recognized in Q2 2026. As of the end of Q3, we have $190 million of cumulative deferred revenue that will be recognized in future periods. Our prorate fuel expense in Q3 was $66 million, up from $34 million in Q3 2025 and $61 million in Q2 2026. The year-over-year increase of $32 million was due to both a higher price per gallon, a $22 million negative impact and incremental prorate production, a $10 million impact. The fuel price per gallon on our prorate flying was $4.56 in Q3, up from $3.04 in Q3 2025 and $4.45 in Q2 2026. In Q3, we revised the estimated useful life on our E175 fleet to 30 years based on demand for this aircraft and current industry practices. With this change, our Q3 depreciation expense was down $16 million, both from Q3 2025 and from Q2 2026. Notwithstanding the puts and takes on our revenue and operating expenses this quarter, our Q3 pretax income was up $21 million sequentially from Q2 2026. Now let's discuss the balance sheet. We ended the quarter with cash of $569 million, down from $601 million last quarter. The ending cash balance for the quarter included the effects from repaying $119 million in debt, issuing $187 million of new debt financing ongoing fleet deliveries, investing $163 million in CapEx, including the purchase of four E175s and buying back shares of SkyWest stock in Q3, consistent with prior periods. As of September 30, we had $238 million remaining under our current share repurchase authorization. Cash flow continues to be the key driver of our value creation strategy. We generated over $700 million of EBITDA during the first three quarters of 2026 despite the headwind from prorate fuel cost. Since the end of 2025, we've invested over $400 million in CapEx for fleet and related assets. Consistent with our practice, let me first update you on some color on 2026. For the full year 2026, we expect to see block hour production up approximately 5% from 2025, consistent with last quarter's outlook. We anticipate our GAAP EPS for 2026 will be in the $10.60 area, including the effect of ongoing fuel price volatility and crew training costs, up from our 2025 GAAP EPS of $10.35. Last quarter, we shared that our 2026 EPS estimates in the area of $11 assumed average jet fuel of $3.65 a gallon for the second half of 2026 on 28 million gallons of jet fuel needed in the second half for our prorate business. Our Q3 actuals included fuel cost of $4.56 a gallon on 14.5 million gallons, a negative headwind of approximately $13 million or $0.26 of EPS on our third quarter results. Our updated 2026 area of $10.60 EPS color assumes fuel cost of $4.90 a gallon on 14 million gallons in Q4. For other modeling purposes, we anticipate our depreciation expense in Q4 to be $80 million, up from $76 million in Q3. We also anticipate our effective tax rate for Q4 will be approximately 27%, translating to approximately 22% for the full year 2026. And we anticipate our total CapEx in 2026 will be approximately $725 million. For 2027, we expect block hour production to be up modestly in the 1% to 2% area from 2026 with EPS similar to 2026. Let me provide some additional color on our outlook for 2027. We anticipate recognizing approximately $70 million of previously deferred revenue in 2027, down from roughly $100 million anticipated for 2026. For comparability purposes, this estimated $30 million reduction represents a headwind of approximately $0.60 EPS in 2027 compared to 2026. I'd like to underscore this is a noncash variance and deferred revenue estimates are subject to change based on various factors such as contract amendments and aircraft utilization. Recognizing less previously deferred revenue year-over-year is likely to be a modest noncash revenue and noncash EPS headwind over the next several years. Although our 2027 GAAP EPS outlook may be similar to 2026, the estimated noncash GAAP headwinds of deferred revenue and higher depreciation in 2027 imply that they are being offset by other cash earnings such as the new E175s and other fleet initiatives, improving the cash flow quality of our 2027 earnings. We are assuming an average price per gallon of $4.30 on 60 million gallons in 2027 for our prorate business, essentially a flat price per gallon on average in 2027 over 2026. A hypothetical dollar of average fuel price reduction in 2027 from the $4.30 per gallon we are using in our 2027 color translates to $1.20 of incremental EPS. Our depreciation expense for 2027 is anticipated to be $350 million, up from roughly $338 million expected for 2026, reflecting the 18 new E175 deliveries in 2027 and the timing of other CapEx. We are estimating our effective tax rate for 2027 to range from 25% to 27%, up from 22% anticipated for 2026. With respect to CapEx, we estimate our total 2027 CapEx to be in the area of $825 million, up from approximately $725 million in 2026. Our anticipated 2027 CapEx includes approximately $525 million for 18 new E175 aircraft, which we anticipate financing through debt, approximately $200 million for recurring maintenance-related items and the remaining $100 million for CRJ fleet initiatives such as reconfigurations and spare engine opportunities. The year-over-year increase in CapEx is driven primarily by the delivery of 13 E175s in 2026 compared to 18 E175s expected in 2027. Wade?

Wade Steel: Thank you, Rob. During the quarter, we took delivery of four new E175 aircraft for United. We currently have 63 future E175s on firm order with Embraer, including 16 for Delta, 11 for American and 2 for United. We expect delivery of seven more new E175s during the fourth quarter and 18 aircraft during 2027. As an update on the firm order of 63 aircraft, 30 are allocated to major partners and 33 aircraft are not yet assigned. This order locked in delivery slots starting in 2027 through 2032. However, the order is structured with good flexibility to defer or terminate the aircraft in the event we don't arrange for a partner to take them. Our long-term fleet plan has positioned us well and refleeting continues to be an important part of that strategy. With last quarter's announced agreement with American, our E175 fleet total is scheduled to reach 300 by the end of 2027, continuing to enhance SkyWest's position as the largest E175 operator in the world. We are also looking forward to deploying the CRJ450 later this year for United. We anticipate operating the first aircraft before year-end. We expect to have 40 CRJ450s under contract with United, and we plan to retrofit our prorate CRJ200s. We are optimistic the opportunity for the CRJ450 may reach a total of 100 aircraft. As previously announced, we have a multiyear agreement to fly 50 CRJ550s with United. As of September 30, 42 CRJ550s were in service, and we expect the remaining eight to enter service by the middle of 2027. Let me review our production. Our block hours increased 1% from Q2 to Q3 2026. We also expect a slight decrease in our Q4 block hours as compared to Q3 due to normal seasonality. For 2027, we anticipate that our block hours will be up 1% to 2% compared to 2026. Next year, we expect to take delivery of 18 new E175s, place 8 CRJ550s into service and capitalize on prorate demand. These gains are partially offset by the gradual return of the remainder of the Delta-owned CRJ900s. We expect all Delta-owned CRJ900s to be returned by the middle of 2027. We will also have several CRJ200s out of service during 2027 as they convert to CRJ450s. Once we get through the return of Delta CRJ900s by mid-2027, the production characteristics and cash earnings from executing on our E175 delivery book and prorate will start reading through better in our results. The full impact of our 18 new E175s coming next year won't show up in our results until 2028. As we convert aircraft and replace some aircraft with new deliveries, we have extensive optionality for value creation, including prorate flying, leasing aircraft or engines or utilizing aircraft for parts as we navigate supply chain constraints. As we've discussed, we continue to face challenges in our third-party MRO network, including labor and part shortages. We expect maintenance expense in 2027 to slightly increase from 2026 due to the modest increase in block hours. Demand for our prorate business remains strong, supported by great community engagement. During the first nine months of 2026, we added 16 aircraft to our prorate agreements to support the growing demand. We still see opportunities to restore SkyWest service to several small communities and we'll continue working with airports to expand our reach. As discussed last quarter, growth in our prorate business contributes to a more seasonal model. We remain confident in our ongoing efforts to reduce risk and enhance fleet flexibility, and we are committed to collaborating with our major partners to deliver innovative solutions that meet the continued demand for our products. Okay. Operator, we're ready for the Q&A now.

Operator: [Operator Instructions] Your first question comes from the line of Thomas Fitzgerald with TD Cowen.

Thomas Fitzgerald: Maybe just to unpack the block hour growth in 2027. Are those E175s back weighted just given the magnitude of those and then the kind of drop-off in growth versus this year? Any color on that would be really helpful.

Wade Steel: Tom, yes, this is Wade. So yes -- the 175s, we have deliveries throughout the year, but the majority of the Delta ones are towards the end of the year for sure. And so yes, we won't see all of the benefit of that block hours until -- really until 2028 as we get into this. So yes, there's still good opportunities out there for us, but a lot of this is going to support 2028, what we've got going on.

Thomas Fitzgerald: Okay. And then just as a quick follow-up, is most of the improvement in cash earnings next year, is that pretty much just a mix from the new 175s? Is there any from the CRJ450 conversions and anything else? I just want to make sure kind of following all the moving pieces on next year.

Robert Simmons: Yes. Thanks, Tom. Yes, as we talked about, the cash -- we'll be receiving nice cash earnings next year that will be offsetting some of the noncash headwinds that we've got with deferred revenue and depreciation. So the fact that our color is for flat EPS year-over-year sort of doesn't include the improvement in the cash flow quality of earnings, given how we're making up for the noncash headwinds.

Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI.

Duane Pfennigwerth: I appreciate the early thoughts on 2027. I wonder if you can give some perspective on the magnitude of the headwind from prorate year-over-year maybe versus the second quarter. Fuel obviously is a bit higher, but do you feel like you're catching up on the revenue side of the house? Is that headwind actually diminishing as you look forward?

Wade Steel: Duane, this is Wade. Yes. So as we talked about in our script, we've had a very nice year in growth in prorate. We've added 16 airplanes to the fleet for prorate. We are seeing -- just like our major partners, we're seeing very nice yield increases. We're seeing still very good demand from the ticket sales and all of that. So we are seeing that. We will not offset 100% of the fuel increase, but we are making consistent progress that our major partners are...

Duane Pfennigwerth: I mean you probably won't bite on this, but your margins are so consistent historically. And if I just look at year-over-year pretax margins, they're getting closer year-on-year here in the third quarter. Now some of that might be the depreciation change, but it feels like it's a pretty obvious margin tailwind in 2027, and it feels like you've kind of given a -- who knows, but it feels like you've given a pretty conservative fuel outlook for next year.

Robert Simmons: Well, I would just say -- this is Rob, that as we mentioned, with similar year-over-year EPS results, that also assumes similar fuel cost and that $1 difference on that fuel cost next year translates to $1.20 of EPS potentially at some point. We're not sure when we get to harvest that. But presumably, that's out there at some point. So that will have an impact on that as well.

Duane Pfennigwerth: I guess just to stay on that point, maybe the EBIT headwind or the pretax headwind from prorate in 2026, are you assuming that's flat, that does not change in 2027? So are you assuming any revenue or unit revenue progress on prorate or basically flat unit revenues, but flat fuel and a similar contribution?

Russell A. Childs: Yes, Duane, this is Chip. I think where you're going in the direction that you're asking the question is pretty spot on. I think we're going to stay at this point, consistent with what our partners have said, consistent with that strategy, we're going to be, I think, conservative in our approach during 2027 relative to what we think yields are going to do as well as what fuel costs are going to do. I think that that's a prudent thing to do from a disclosure perspective and a predictive perspective, but most importantly, also a strategic perspective as well. So I think we probably came in Q1 and Q2. I think the world thought that some of these energy costs might be temporary and go away. We saw a little bit of that during the year. But I think from our perspective now, it's important for us to not make any predictions about what oil is going to do, but make sure we give you a clear model and what you're saying about consistency with 2026 is pretty spot on.

Operator: Your next question comes from the line of Mike Linenberg with Deutsche Bank.

Michael Linenberg: Yes. So given just the fuel price, presumably the prorate business is not nearly as profitable, maybe even some of those routes are loss-making. I know you talked about adding 16 aircraft to prorate this year and so driving good growth. But is that -- for next year, are we seeing -- is the plan to add more airplanes to prorate? So if you could just answer that and kind of give me a sense of maybe not providing margins, but how much more profitable your fixed fee business is relative to your prorate given the fuel price?

Wade Steel: Yes. So as we said in the script, we added 16 airplanes. Next year, we're going -- we're looking at markets. We're working with communities. The demand continues to be there and strong from our communities. We're going to be extremely patient and disciplined in what we add to the -- into our models going forward. We need to make sure these markets are accretive and add value to the company. So we'll be very patient with that. If we need to wait a while, we'll wait, right? We're fine waiting. That's why we -- we talk about this fleet flexibility. This is exactly what it is. We can just wait and be patient for that. And so we're only going to add stuff that's accretive to the company.

Russell A. Childs: Mike, this is Chip. I'd also add to Wade's comments that the demand -- look, the model is still doing well. We're not at all to clarify, we're not concerned about the prorate model. I think from our perspective, I think that certainly, when you anticipate that we're in a situation where energy costs are going to be extended instead of temporary, it's the times when I think this is where we really take care of our partners, our people and shareholders and approach it from a patient view, although the demand is still very, very strong. I mean one thing that we're seeing in small communities that demand is not going away. How we execute on that demand is it looks a little different than it did six months ago or eight months ago, and we're still in a fantastic position with our fleet, and we're going to be disciplined and patient as we execute.

Michael Linenberg: Okay. And then just, Rob, you highlighted the trigger to change depreciation. Can you tell us what was it before? And what did you go to?

Robert Simmons: Yes. So for the E175 fleet, Mike, we were at 22 years, and we extended that to 30 years, consistent with other practices in the industry. It also, I mean, had to do with some successful contract extensions that we recently got done, as you probably remember, the fact that there's no alternative to the 175 regional aircraft at this point, our experience with the CRJ fleet and how long we've been able to operate those and expect to continue to do that and just the fact that demand for this airplane remains very strong.

Michael Linenberg: Was -- just so I know, the 22 years, was that down to a certain residual value? What was that? And the 30%, what residual -- are you going to 15% or 0%? I'm just -- I'm trying to see how much the rate of depreciation has actually come down.

Robert Simmons: Yes. So the residual -- assumed came down as well.

Michael Linenberg: Okay. Okay. All right. All right. I guess just one quick last one since I have you. On the smaller shells or the aircraft with less seats, typically in a high fuel price environment, airlines typically want to fly less of that. I guess since a lot of your smaller shells are on prorate, and so I guess you're bearing the cost, you're probably not getting pushback from your partners. I mean, is that the way to think about it?

Russell A. Childs: No, Mike, this is Chip. I think that, that is not an assumption that you should make that the partners are pushing back. I think particularly one is extremely excited about the smaller aircraft. And if you see the LOPA and some of the things we're doing to the 450, it's going to be a great product. As you can imagine in the economy that we're living in now, relative to what our other -- our partners have said relative to premium -- revenue, putting first-class seats on a CRJ200 and a very good LOPA with an outstanding interior is a very valuable aircraft. And from a fuel perspective, it's also a lot lighter than it is with 50 passengers in it. So to a certain extent, the way that these assets are extremely valuable and debt-free, and we have some flexibility, maintenance is obviously a little bit higher than on the ERJ product. But the economics of this, particularly the smallest aircraft seem to be able to work out well even with these fuel costs. So from that perspective, again, this is why we outlined that we're going to an all-dual class fleet because we're matching what you're hearing throughout the economy right now.

Michael Linenberg: Is it these airplanes, these investments? These are like 10- or 15-year investments, right? I mean I realize the CRJ200s are fairly old, but it seems like if you maintain them well enough, this is something that you could be flying from the 10 to 15 years. Is that -- maybe that's the best way to think about it. It's rather than focusing on where the fuel price is today, but that this is a long-term investment.

Russell A. Childs: Yes. I think you've summarized it very well, Mike. I think that this is a long-term investment in a high energy cost environment that causes some patience. But again, SkyWest has had an exceptional record. Our people have done a phenomenal job maintaining these airplanes from the get-go. And how they've done that has enabled us to do some things today that maybe a lot of other situational carriers are not able to do. Our people are great. They've got a great strategy with this. The partners are outstanding in working through this. And I think we're very excited about the long-term product that we're going to have with these airplanes.

Operator: Your next question comes from the line of Savi Syth with Raymond James.

Savanthi Syth: Just maybe a quick follow-up on Mike's question. Just with the kind of revaluation of the useful life of the E175, did the valuation on that change at all in the sense that is the kind of unpledged assets around $1.5 billion still? Or where is that today?

Robert Simmons: Yes, Savi, Rob here. So your question on unpledged assets continues to be very strong. It's over $1.5 billion, as we've said other places. And we would anticipate that we continue to have strong capital availability if we need it related to these unpledged assets that we have and continue to grow.

Savanthi Syth: That's helpful. And then just on the -- I think Wade mentioned on the kind of the -- CRJ200 transition next year, many will be out. Just curious what the experience so far has been on how long it's taken to do those 450 conversions, if it's kind of any different than the 550s? And curious just generally how much fewer aircraft you have flying because of the transition next year that maybe kind of goes away kind of after next year or maybe in a couple of years once you've done that full transition?

Wade Steel: Savi, this is Wade. That's a great question. So on the CRJ450, we are still in the process of converting the first two airplanes. We have them down right now. We're working with our OEM partners on the service bulletins to get those done. So obviously, the first airplanes just take longer naturally just because you're working through the first-time issues, right? We'll work through those. We've seen those before as we've done the 550. So we anticipate that the CRJ450 and the 550 conversions will be very, very similar. It takes two to three weeks to do these conversions. We're also putting Wi-Fi on all of these airplanes. We're very excited about that. And so we'll have a very nice product at the end of it. We do anticipate pulling down three or four lines to do these conversions, right? And so there will be three or four lines down of less flying that we could have been doing if we didn't have these going. And so it will -- it's an investment year that we're going to be doing in the fleet. 2027, we'll be converting a lot of airplanes. And so it will take some time, but it's a great investment, as we've talked about in the future for this fleet.

Savanthi Syth: Great. And if I might just squeeze one more Wade. I noticed that one of the Delta aircraft to shift from '27 to '28. Was that just Embraer delivery timing? Or was there something more to that?

Wade Steel: The Delta delivery, it's just timing. It's just timing and just cleaning up some of the delivery schedules with our -- with Embraer. So there was nothing significant there at all.

Operator: Your next question comes from the line of John Godyn with Citi.

Unknown Analyst: This is Max on for John. We saw a decline in load factor this quarter year-over-year. Does this reflect any softening in the strong demand previously cited for the prorate business? Or did you observe lower load factor than like the mainline partner routes? Or is this in line with some of the similar trends we've seen this EPS season trading loads for higher yields across the network?

Russell A. Childs: John, this is Chip. I don't -- I'm honestly not reading too much into that. Obviously, from the perspective of how we price and some of our partners may price relative to fuel and may be pushing some of those loads down and around just slightly and a little bit. I would more be concerned about total revenue and that type of stuff. I think when you have high fuel costs, revenue strategies are different for our partners relative that may have an impact on our load factor, but we're not -- I mean, we're seeing, I will tell you, extremely full flight still a lot of activity, lots of volume, all of the things that we've seen from an operational perspective, we're not seeing anything backing off from any of that type of stuff. So certainly, I would point to some of the things that the partners are pricing and how they're managing our lift on their side. And from our perspective, it's still extraordinarily high load factors and very, very busy.

Unknown Analyst: Great. Good color. And then just kind of switching gears a little bit. You mentioned earlier, you're well positioned to invest in various avenues given your liquidity position, including further aircraft conversions, heavy maintenance, share repurchases, et cetera. I just want to double-click on this and dialogue on your high-level capital deployment strategy over the next few years and any areas of focus we can expect?

Russell A. Childs: Yes. So it's a great question. From a capital deployment strategy, I think we've been fairly consistent in that, and we'll continue to do much of the same. I mean our favorite investment is always investing in our fleet and the flexibility of our fleet. And we've got a heavy delivery year coming up in 2027, taking 18 new E175s. So obviously, from a capital standpoint, the chance for us to continue to invest in these accretive and cash flow generative E175s, it's our favorite thing to do. But there's other investments that we'll be making in CapEx next year, where I think you'll start to see CapEx probably come down starting in 2028 a little bit. And we'll continue to deploy capital much the same way we have, including all the fleet opportunities that are in front of us right now.

Operator: Your next question comes from the line of Catie O'Brien with Goldman Sachs.

Catherine O'Brien: Maybe just coming back to the potential on CRJ550 and 450 conversions. How many of your CRJ200 and CRJ700 are currently off contract or will come off contract in the next 12 months? And then on the demand part of this equation, do current conversations with your partners point to the possibility of all that potential capacity maybe winding up in CPA or prorate flying in those new configs? I know you've given that number on maybe up to 100 CRJ450s, but just would love to get the holistic picture across both supply and demand.

Wade Steel: That's a great question. So we'll start with the CRJ200 and CRJ450s. As I said in my script, we have an agreement with United to fly 40 CRJ450s for a multiyear contract. So those are all under contract now. We're bringing those into service right now. We'll bring those into service during '27 and '28. And so this will build in those years. We are operating about 50 to 60 CRJ200s in prorate, and that number will be fairly consistent. So as we said in our script, we have about 100 -- we'll have about 100 of these CRJ450s under a long-term agreement with United. We still have about 20 to 25 parked beyond the 100 that are potentially out there that we can bring back as well. As far as the CRJ700s, once we take delivery of some of the 175s and some of the other fleet transitions that we're doing, we'll have 20 of them that are not under contract. And so we have not put those block hours in our model at the moment. We do not have those allocated. We have very good opportunities to place those 700s in the future, whether it be in our leasing business or our prorate business or CPA, we'll work with our major partners on that. We'll be very patient as we work through this in the next couple of years as these airplanes kind of come out as we take new deliveries. And so just like we've always done, we'll be patient, we'll be disciplined with those airplanes, and we'll find a very good home for those.

Catherine O'Brien: Okay. Great. And then, Rob, I hope it look for me just for one more question on the depreciation change. But -- was the $16 million year-over-year change you referenced, was that the savings from the accounting change? Are there some other moving pieces there? And then what's the outlook for the impact of 4Q? And was the change contemplated in your update to guidance last quarter or not guidance, but color that 2026 EPS would be in the $11 range? Just trying to get a sense of some of the moving pieces.

Robert Simmons: Yes, Catie, the $16 million is the savings in Q3. As we said, we do expect depreciation to be up in both Q4 and up in 2027 for modeling purposes, but there was a $16 million savings in -- during the quarter.

Catherine O'Brien: And that carries forward, right? Like will that run rate? Or is it one time or forgive me for the...

Robert Simmons: Yes. This change was effective for our 175 fleet. And so that remains intact for the foreseeable future.

Catherine O'Brien: Okay. Got it. And then maybe just one more, if you'll allow it. But on the 33 delivery slots with Embraer that are yet to be placed, how far in advance do you need to let Embraer know that you'll be taking those aircraft? And then on the 30 that already are spoken for, are those using up the slots on the earlier side of that '27 to 2032 window such that the 33 other slots not yet claimed or kind of further out? Any color there would be helpful.

Wade Steel: Yes, that's a great question. This is Wade. So on the 33 that are unallocated at the point, those are in the very, very back half of 2028. And so in order to firm those up, it's a little more than a year that we need to work with our -- with Embraer on that. And so as you know, we constantly work with our major partners on very good opportunities for those. And so we have those -- the 30 that are coming, as we said in my script -- we have seven that are coming at the end of -- in the fourth quarter of this year. We have 18 next year. And so those are all coming, but the unallocated ones are out there at the end of 2028 at this point. They start at the end of '28 and go '29 and '30, so.

Operator: There are no further questions at this time. I will now turn the call back to Chip Childs for closing remarks.

Russell A. Childs: Thank you, Al. Again, we want to thank everybody in their interest in SkyWest and dialing in and listening to our third quarter results. We appreciate the things that we're trying to do. Again, I can't go on without thanking the 16 -- over 16,000 professionals that do a phenomenal job, the best in the industry every single day. We're grateful for the shareholders. We're grateful for the relationship we have with our partners as well. And we look forward to giving an update on our Q4 in three months from now. Thanks again.

Operator: This concludes today's call. You may now disconnect.