SkyWest's Management Discusses Q1 2013 Results - Earnings Call Transcript

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 |  About: SkyWest, Inc. (SKYW)
by: SA Transcripts

SkyWest, Inc. (NASDAQ:SKYW)

Q1 2013 Earnings Call

May 8, 2013 11:00 AM ET

Executives

Bradford Rich - President

Russell Childs - President and Chief Operating Officer, SkyWest Airlines

Bradford Holt - President and Chief Operating Officer, ExpressJet

Michael Kraupp - Chief Financial Officer

Eric Woodward - Chief Accounting Officer

Analyst

Jim Parker - Raymond James

Duane Pfennigwerth - Evercore Partners

Michael Linenberg - Deutsche Bank

Glenn Engel - Bank of America

Operator

Good morning, and welcome to the SkyWest first quarter 2013 financial results conference call. (Operator Instructions) I would now like to turn the conference over to Mr. Bradford Rich, President of SkyWest, Inc. Please go ahead, sir.

Bradford Rich

Thank you very much, operator. And thank you to all of you, who have taken the time to participate with us on the discussion of our first quarter results. We are grateful to all of you for making the time, and again express appreciation for your interest in the company.

First of all, I want to just introduce those, who are in the room here at SkyWest's headquarters, who will be participating this morning. I have with me Chip Childs, President and Chief Operating Officer of SkyWest Airlines; I also have Brad Holt, President and Chief Operating Officer of ExpressJet; I have Mike Kraupp, Chief Financial Officer of SkyWest Inc. and subsidiaries; and also Eric Woodward, our Chief Accounting Officer of SkyWest Inc. and subsidiaries. We also have other members of our staff here with us for support.

I want to first of all turn the time to Mike Kraupp, who will read our Safe Harbor statement and forward-looking statements.

Michael Kraupp

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

All forward-looking statements expressed in this call are made as of the date here of and are based on information available to us at this time. We assume no obligation to update any forward looking statement, actual results will vary and may vary materially from those anticipated, estimated, projected or expected for a number of reasons including those discussed in today's press release or expressed during the conference call or set forth in our 2012 Form 10-K, and other reports and filings with the Securities and Exchange Commission.

Bradford Rich

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

So first of all, as you have seen from the earnings press release this morning, the company reported consolidated earnings of $3.2 million or earnings per diluted share of $0.06. So it's good that it's an increase from the results of the first quarter of last year, where we reported just about $1 million net loss and a $0.01 loss in diluted earnings per share. So we're pleased with the progress year-over-year, admittedly that level of earnings needs to be more, it's not the earnings that we had expected.

I want to give some comments about kind of the composition of the earnings, as you will see in our 10-Q, which will be filed here in a few days. So you'll get a little bit of information in the 10-Q about the segment reporting or the financial performance of the two primary operating entities.

The financial performance at the two airline entities was distinctly different during the quarter. Although, we continue to make fundamental progress at ExpressJet and have confidence in what's going on there. The first quarter of 2013 did prove to be a difficult and a challenging quarter.

In last quarter's call, I specifically gave a warning, that due to the winter storms that we saw in the first part of the quarter that I gave an indication or a warning that things were not starting out that well. And they worked and they continued actually to get worse as we went throughout the quarter.

And so a lot of that winter activity was at locations were our ExpressJet operation is very heavily concentrated, and the effect of those winter events was disproportionately felt at the ExpressJet operation, and that certainly is showing up in the financial results at ExpressJet for the quarter.

These winter events to give some perspective to what as we detailed in the release this morning, the negative impact was approximately 4,500 fewer block hours than we had projected that were due to approximately 1,900 canceled flights. And again, most of that activity was at the ExpressJet operation.

Contributing also to some of the negative results there was the lessened expected results were some increased maintenance expenses, partly due to timing and partly exacerbated due to some of the weather events that we just mentioned.

On the SkyWest Airline side, SkyWest Airlines had a very good first quarter. Pro-rate flying had a very respectable positive margin in the first quarter, which I think is the first time in a long, long time that we have had pro-rate income in a first quarter. Also contributing to very positive results of SkyWest Airlines is the maintenance timing.

We have been detailing this event for the market for a long time and the mismatch in expenses versus revenue were significantly decreased in the first quarter, which also contributed to improved results at SkyWest Airlines. All in total, SkyWest Airlines' performance more than doubled in the first quarter, which is a very good performance.

I am going to at this point turn the time back Mike, to let him give a further lot more detail to our financial performance during the quarter.

Michael Kraupp

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

Nevertheless, this morning we did report net income of $3.2 million or $0.06 per fully diluted share for the quarter ended March 31, 2013. This compares favorably to reporting a net loss of $0.7 million for the same period last year.

As noted in our press release, we did experience some negative impact to financial results from the severe weather experienced and other operational challenges during the quarter. And so overall, we are pleased to be able to report a profit and what has become one of our most challenging quarters.

Consistent with our comments and reporting from the previous two quarters, regarding how our major partners are currently purchasing the majority of fuel for our contract flight, we continue to experience a reduction in our operating revenues and operating expenses, as a result of no longer purchasing fuel and being reimbursed by our major partners. Due to these changes, we experienced a reduction of $99.7 million in our topline revenues.

During the quarter ended March 31, 2013, we also experienced a decrease of $19.7 million in the amount of engine overhauls that are considered pass-through costs under our contracts, which also resulted in a reduction of topline revenues. Offsetting these reductions as outlined, we did experience a 2.8% increase in our block hour production, which translates into about 15,500 additional block hours that did indeed generate additional topline revenues of about $10.5 million.

Our total block hours produced for the quarter just ended were 571,991 compared to 556,421 for the same period last year. Also as noted from the release, we did experience the impact of severe weather, which resulted in about 1,900 cancelled flights and 4,500 fewer block hours. And we've estimated a negative impact of those events that occurred to be about $4.5 million pretax.

Our total operating expenses, which does include total operating expenses and interest, decreased by a net amount of $114.6 million or roughly 12.5% for the quarter just ended. After considering the reduction that I just previously outlined in my comments of lower fuel cost and engine overhaul cost, our total airline expenses increased about $4.8 million or less than 1%. That compares favorably to the 2.8% increase in our block hour production.

As a result of these items, we did report operating income of $15.6 million for the quarter ended March 31, 2013, compared to $20.5 million for the same quarter last year. Also our operating margin was 1.9% for the quarter just ended and that compares to 2.2% for the same period last year.

Let me also point out a couple of items that impacted our other income and expense category. For the quarter ended March 31, 2012, the last year, we had actually recorded a little over $4 million from our share of losses related to ownership of TRIP Airlines and Air Mekong.

Due to the sale of our ownership in TRIP and due to the wind down of Air Mekong, on February 28, 2013, which I believe Brad is going to discuss, we did not record any impact of operations from these two entities for the quarter just ended. We did however record $5.1 million from the receipt of maintenance deposits that were collected from Air Mekong under a sublease arrangement as a result of Air Mekong's termination of these subleases.

I also wanted to point out that, you'll see this in the 10-Q, but we'll make reference to it here, and also included within the operating expenses, so above the other income expense category, we did have a small settlement issue with Delta, wherein we paid them $3 million to settle a matter that we had with them.

Turing to the balance sheet, we had $631.5 million in cash and marketable securities at March 31, 2013. That compares to $709.4 million as of December 31, 2012 or a reduction of about $78 million. This reduction was consistent with the semiannual lease and debt payments that are paid primarily in January.

Our net debt position was $978 million as of March 31, 2013, compared to $1.2 billion as of March 31, 2012, so a year ago, and that result in a net reduction of about $142 million. Also during the quarter just ended we did spend $23.5 million in non-aircraft capital expenditures.

What I wanted to do also real quick is just give you a very quick update of what we see the quarterly ASMs for the next three quarters. For the second quarter based on our latest estimates, we look to produce $9.9 billion ASMs in the third quarter, its 10.1, and in the fourth quarter $9.2 billion ASM.

And that will conclude my formal remarks. Brad back to you.

Bradford Rich

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

We continue the execution of the transaction with Delta. That's one that we have been talking about for some time, where we're taking the 34 dual-class airplanes. And then, in the fourth quarter of this year, we'll begin the transition out of some of the 200s at Delta. But we continue a very successful execution of that transaction, which we believe is significant.

I think most of you know we previously discussed not just the sale of our ownership in TRIP, but the wind down or I should say just the closing down of the Air Mekong operation. Now the issue there is the four aircrafts that we're operating at Air Mekong are airplanes that we, meaning SkyWest Inc. have the financial obligations on.

We're also pleased to announce that those airplanes we have come to an agreement with U.S. Airways to place those CRJ900s in the U.S. air operation. Two airplanes will go into service July 1, the other two will go in July 15.

There is significant amount of activity going on in the industry. We are certainly aware of it, and we know that most of you are aware of that. I would just make a general statement that we are working very aggressively in those areas, where we see opportunity.

We are working aggressively with our major aircraft partners. We are working with aircraft and airframe manufacturers. We are working with engine manufacturers. We are working with our employee groups. We are doing everything. I think that you would expect us to do in an environment here, where we see a lot of opportunity relative to fleet replacement, fleet rationalization.

And we see the major airlines doing what they need to do to take advantage of some of the recent improvements in scope. And we expect to participate in these opportunities. We have nothing to announce today, but just want you to know that we are doing what you would expect us to do and aggressively working these opportunities.

We feel that with the strength of our credit, the strength of our balance sheet, our liquidity, our positioning geographically throughout this country, we are well prepared and positioned with our people, our resources to take advantage of these opportunities. And we are working hard to achieve some of those.

Having said that, we will go ahead and conclude the formal remarks now, and we would be happy to answer some questions.

Question-and-Answer Session

Operator

(Operator Instructions) The first question will come from Jim Parker of Raymond James.

Jim Parker - Raymond James

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

Bradford Rich

That's right. We expect the Q to be filed probably later this week on Friday.

Jim Parker - Raymond James

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

Bradford Rich

So I'm not going to get into the details of the profitability, Jim. I mean it will be there for you to see Friday, when the Q is filed. And so I think for FD and those kind of things and myself, but it was important here to at least give some general perspective about the performance of each of the entities. But I need to let you wait as everyone will and see it as filed in the Q.

But generally, your statement is correct. I mean SkyWest performance in the quarter was very good. As I mentioned the margins or I should say the overall net income generated at the SkyWest Airlines entity more than doubled this first quarter, as I mentioned partly due to the success for the pro-rate flying, which was really a significant improvement or I should just say significant performance particularly for our first quarter. And then, as we said some of the timing and the maintenance events significantly helped as well. But generally, the performance just stays strong and consistent.

The ExpressJet operation, we have made significant progress and on a general statement had got net back, what I just described as very closed to breakeven. This first quarter due to the significance to the weather, and that sometime it's hard to distinguish between maintenance events and those that are just exacerbated by weather.

So some we quote as weather and then some we just quote as maintenance. But it was just pretty material impact in the quarter, which negatively impacted the quarter. And yes, it took what we had projected in the first quarter as a very modest loss to a fairly material loss. But I don't think that's indicative of the run rates.

So we have made significant progress there. We've had some fundamental problems relative to some thing like the spare ratio of the fleet, and particularly on the legacy ExpressJet side, which we are getting fixed, that will help the operating performance. And then look, we still have a part of the overall synergistic value that was to be created at ExpressJet.

We've realized about half and look I know we've been saying, we've got about half of those synergistic benefits for a long time. And look, a lot of the remaining benefits are dependent on the Joint Collective Bargaining Agreement, and those are still being work through. And I think we're making progress there, but we are not, where we need to be at.

Jim Parker - Raymond James

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

Bradford Rich

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

Jim Parker - Raymond James

Well, my question though has to do with, if one operation is more profitable, more efficient than another one, I'd put those aircraft with a more efficient, more profitable operation?

Bradford Rich

Well, so Jim, those are there decisions that we're making at the company.

Operator

Our next question will comes from Duane Pfennigwerth of Evercore Partners.

Duane Pfennigwerth - Evercore Partners

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

Michael Kraupp

So Duane, I think the way that we'll answer that question is, your observation first is I think very accurate. I mean, if you just take the natural terminations of the fleet and assume no replacement that is what happens. And your assessment is also fairly accurate, that those aircrafts that are terminating happen to be in the lower producing margins of the portfolios.

So, yes, declining fleet doesn't necessarily mean declining profitability or decreasing cash flows. Now, the important thing to note is that in some of our contracts we have replacement rights, which enable us to replace airplanes as long as the major for which those airplanes are terminating want additional lift.

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

Duane Pfennigwerth - Evercore Partners

I guess that leads to my second question, which is it seems like you have two options. You can pursue this growth business, deploy a bunch of capital to pursue that growth. Probably it's earnings accretive, but its not free cash flow accretive or you cannot grow and return capital to your shareholders in what appears to be a pretty mature industry with a bit of a reprieve on growth.

So how do you think about growing and deploying that capital towards the growth? First is just taking a more focused approach on capital return. It may seem like the cash flow potential of your business is pretty substantial relative to your market cap and it seems like that has to be a debate.

Michael Kraupp

Question that you would expect that we are very well aware of and very focused on. First of all, I would just say that we are in assessing our response or how we're going to deal with your question. I think we are at a important and critical time in our industry.

We're at time when there is fleet replacement, fleet rationalization going on in our part of the industry and our ability to secure additional flying in this market right now, I think is very important to us answering that question because if we can get fleet replacement and as a mix of the fleet changes to more and more duel class aircraft or I should just say, large regional jets that we would expect improving performance.

And I would say very strong free cash flow in spite of the investment that it will take to get into those airplanes. Because look as I said earlier, we've been for the last three years or three-and-a-half, we have been very aggressively working with manufacturers, engine providers, part suppliers in a new way to manage these fleets. And I think we are doing it in a way, which will make us not only very cost effective, but gives us the flexibility to reduce our cash and investment in growth, so all of that is going into this equation.

And when some of these opportunities whether they are growth or just fleet replacement, I think our ability to create additional value and generate cash, and again, this is where our Safe Harbor becomes very important, and this is my opinion, I just think our ability to generate both respectable margins and increasing cash flow and therefore value, I think our opportunity to do that is very strong.

But if things don't work out as we suspect then the timing is very important that we address the very question you've asked. So I'll just leave it at that by saying we understand the question, we're focused on it and that we're in a very important critical time in our strategic element, in our growth and replacement and all of that to answer that question.

Operator

The next question will be from Michael Linenberg of Deutsche Bank.

Michael Linenberg - Deutsche Bank

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

Michael Kraupp

Mike, with regards to the comment, well, first of all, let me just reclarify for this quarter. In this quarter we did not book anything in operations, operational income regarding our ownership, the percent of ownerships that we had in trip in Air Mekong. We closed our trip transaction last July. And we've been on a quarter lag with regards to reporting our share of potential income or losses. So having set that timeframe on that transaction, we again did not have anything in the quarter with regards to trip.

Now, with regards to the investment that we have in Air Mekong, yes, as of the end of last quarter, we still had basically a basis of about $1.3 million on that. However, in conjunction with the wind down of that entity, SkyWest is working out with Air Mekong, deposit payments, lease payments, inventory and few other issues that are concerning sort of winding down that transaction.

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

One other comment with regards to trip and the sale that we did we're going to receiving payments over a three year period. And we received payment one in last year. We will get another payment this July. And then a payment in the following year at which point in time we'll record a potential gain on that transaction.

Michael Linenberg - Deutsche Bank

What was the payment or what should we anticipate in July? How much is that?

Michael Kraupp

Our payment is going to be about $17 million.

Michael Linenberg - Deutsche Bank

So $17 million comes in. And then the $5 million to $6 million non-op positive that was tied to, I heard something $5 million for the airplanes coming back.

Michael Kraupp

We've already received that. Those are maintenance deposits that were required that Air Mekong pay under our sublease arrangement. And just due to the accounting rules, I won't go into all the details of those, but due to the accounting rules and the fact that we're not allow to accrue maintenance for those aircraft, we think we were required to take those in the income.

Michael Linenberg - Deutsche Bank

And then my second question, you provided capacity for the second quarter, what was it $9.9 billion ASMs and I believe that is what you had in your previous guidance and yet with the impact of sequester when I was tracking the cancellations, because I know we had a lot of delays, but I noticed there were a lot of SkyWest and ExpressJet cancellations.

So number one, are you making that up in the quarter with additional flying after it looked like a tremendous amount of cancellations over the first few weeks. And number two, what will be the impact or can you give us, sort of, rough numbers maybe what the financial impact of those cancellations maybe for the June?

Russell Childs

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

Bradford Rich

So I think first of all, Mike, the question was, where the impact of the sequester built into your numbers. And the answer to that is, yes. Now, the impact of this sequester was, I think the biggest impact that we saw was in our LAX operation, where in some of those days, we have our normal conditions, good weather, good flow, normal arrival departure rate of 84 per hour, than in come cases it went to 12. And, Mike, I know you follow this closely, so there was some impact but that's built into the projections that Mike gave you. And I don't think that's going to have a material impact on our second quarter.

Operator

The next question will come from Glenn Engel of Bank of America.

Glenn Engel - Bank of America

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

Bradford Rich

So let me take this one. I'm actually glad you're bringing that up. This is a settlement with Delta that relates to some travel issues. It affected both airlines that was booked above the line through our normal operating expenses, which I'm actually glad you're bringing up from the perspective, even though we have some non-operating, which is below the line income of $5 million we have this, which was a negative above line.

So I think it's very easy to take the $5 million another and say that all of our earnings were non-operating, which is not exactly the case. We had some stuff above the line, some stuff below the line. But then direct answer to your question, again, this is an issue where we settled out with Delta Airlines, some things that relate to non-rev and positive space-type travel throughout the systems, and it settled, it's done. And so that's really all there is to that.

Glenn Engel - Bank of America

A Second small question to be on the non-op line, it was $6.039 versus the $5.1 million that you mentioned with Air Mekong, what's the other $1 million from?

Michael Kraupp

Just simply, gains or losses that we've got in there on equipment, other equipment.

Glenn Engel - Bank of America

The prorate last year was $2.3 million loss on $69 million of revenues. Can you give me what's the exact numbers where this year in the first quarter?

Michael Kraupp

We actually have an operating profit of just $800,000 this year and what was your other question in relation to?

Glenn Engel - Bank of America

That there was $69 million in revenues last year.

Michael Kraupp

Yeah, roughly $80 million in revenue this time.

Glenn Engel - Bank of America

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

Michael Kraupp

Yes.

Glenn Engel - Bank of America

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

Bradford Rich

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

Glenn Engel - Bank of America

And the regular, the non-engine mismatch, the timings in terms of airplanes and all of that, I thought they were heavy in the first quarter, went to low-30s.

Bradford Rich

They actually were heavy on year-over-year basis as well. Do you have any forecast with regards to future, happening the rest of year? Do we think they are going to be more, heavy than what we just did?

Michael Kraupp

Yes.

Bradford Rich

So I don't think its going to be heavier than the run we've have just seen. Beyond that, I think if anything its going to trend down, and Glenn look, if anything changes on that, we'll make a commitment here to get back to you The best information we have right now it says that the trend if anything will slightly decrease through the remainder of the year.

Operator

The next question will come from (inaudible) of Raymond James.

Unidentified analyst

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

Russell Childs

The issue here is revenue collected just under our reimbursement of CTAs relative to total engine maintenance. So the actual events in this area of the business that creates the mismatch will just continue to decline. So I think the question is in '14, will we still have more expense versus revenue? And in '14 it will be the first year in this kind of Bell curve that we actually have more revenue than expense.

And I think the important thing to note about this too is this isn't like a multiple Bell type curve. This was one big Bell and then it goes away. And so our projections are the number has continued to come down. In '14, it will now go back slightly positive and then this event will go away because these particular aircraft will naturally terminate. But these are the only ones in the fleet that have this issue.

Unidentified analyst

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

Bradford Holt

I'll just talk about the transition of the 34 dual-class that are coming in. We have delivered 33 and we just have taken some of them within the last couple of days.

Bradford Rich

We got the last five, they are coming in the next two weeks. And then that will be it.

Bradford Holt

Then that all will be it.

Unidentified analyst

So all in service?

Bradford Rich

All in service in the next two weeks.

Operator

We have a follow up question from Michael Linenberg of Deutsche Bank.

Michael Linenberg - Deutsche Bank

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

Bradford Rich

So look as I stated, again, today and in previous calls we are working very aggressively with all manufactures including Embraer on the larger aircraft types. So this question is a question that will be driven by what the major partners want to fly relative to the cost that we can deliver this service.

So we have been aggressively marketing aircraft costs by Bombardier product and Embraer product. I think that most salient issue here is, United I think is trying to accomplish number of things. I mean, first of all, I think they want some diversification in their portfolio and this is one way to get it.

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

Michael Linenberg - Deutsche Bank

Brad, just as a sort of quick follow-up, I mean, through your ownership of Trip, I mean, I know that there were members of the SkyWest management team down in Brazil. So you probably have more familiarity then I guess people realized with the larger Embraer 170/190 aircraft, because those were both formed by Trip?

Bradford Holt

I think that's a correct statement.

Operator

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

Bradford Rich

Again, I always appreciate the opportunity to get on and particularly enjoy our discussions and the opportunity to answer questions. And I think you would be surprised, if I didn't, again, just make reference to our employees and express appreciation to them. Look, whether it's SkyWest Airlines or ExpressJet or any of the employees of the company, we've been through a challenging and difficult last few months.

The quarter particularly, I mean, it was just very challenging from so many perspectives. And we really are appreciative and grateful to all of our employees. Sometimes it feels like in these difficult times, they don't get enough appreciation and we just are very grateful for what they've all gone through and doing the best that they can to keep these systems operating safely and reliably. And so for that we're grateful. And we're grateful to the investment community for your interest in the company and for your continued support.

We remain very confident. As I've said earlier in our positioning, we continue to work very aggressively to increase and strengthen what we believe is already a very strong strategic position in this marketplace. And with the quality and talent of our people and our financial resources in our geographic breadths and depths and concentration to the country, we just feel very strongly about the future of the company. And with that again, I will thank you. And we will go ahead and close the call. Thank you very much.

Operator

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

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