A clip from the Q&A section of the SkyWest Inc, earnings Conference call:
(seems pretty clear how they intend to "right the ship")
Helane Becker - Cowen and Company
Okay and then can I just ask one more question? On ExpressJet, when did you ? I mean this has been a problem for years as you pointed out, so when did you decide that this has to ? there is like almost an end date?
Have you been talking about this at the board level for several months or just is this just start? I am kind of surprised you didn?t start to take some of these, could you guys are pretty good at being profitable and focused on your business. Then you didn?t start to take some of these initiatives last year rather than this year?
Brad Rich - President
So, look, we have been working on some of these initiatives very, very specifically for several years. And as you know, some of the ? several things that have ? that are ? let me just say there are things that have changed within ExpressJet and the network that we operate.
Some of the improvements and the cost reductions and the initiatives we have been working on have been overshadowed by other inefficiencies in the system. We have some cost increases in some, I mean, I hate to make excuses and call them uncontrollable.
But for example, in maintenance, we have some escalating costs, primarily due to age of ? either age of aircraft or the utilization on the airplanes that are causing increases in maintenance that are escalating higher than our rates are escalating.
So, we knew when we bought ExpressJet that we had to get some efficiency and productivity and integration savings and but we also knew that in the near-term, the results would underperforms relative to our normal expectations, because we didn?t have tail risk.
We knew the rates were on the very low end of the market, but as the natural terminations happen and we expect to ? the original thesis I will say was to renew and extend contracts at what would then be market rates. Well, in the meantime, the system has changed.
The system has been spread out. It was very concentrated in Newark and Cleveland and Houston and now we are flying in Chicago and Denver, the utilization on the airplanes have gone up.
The spare ratios are not adequate. I mean, there is just a number of complicating factors here that have kind of exacerbated the problem and in the meantime, we haven?t achieved the joint collective bargain agreements that we need to get and that?s delaying some of the efficiency and productivity improvements that we needed to realize.
And so, look all of this has just, I mean, yes, the board has been talking about this for a long time and yes, as you can imagine, the board is not very patient with this and so, things are just moved to a higher priority and a sense of urgency and that's where we are.
(seems pretty clear how they intend to "right the ship")
Helane Becker - Cowen and Company
Okay and then can I just ask one more question? On ExpressJet, when did you ? I mean this has been a problem for years as you pointed out, so when did you decide that this has to ? there is like almost an end date?
Have you been talking about this at the board level for several months or just is this just start? I am kind of surprised you didn?t start to take some of these, could you guys are pretty good at being profitable and focused on your business. Then you didn?t start to take some of these initiatives last year rather than this year?
Brad Rich - President
So, look, we have been working on some of these initiatives very, very specifically for several years. And as you know, some of the ? several things that have ? that are ? let me just say there are things that have changed within ExpressJet and the network that we operate.
Some of the improvements and the cost reductions and the initiatives we have been working on have been overshadowed by other inefficiencies in the system. We have some cost increases in some, I mean, I hate to make excuses and call them uncontrollable.
But for example, in maintenance, we have some escalating costs, primarily due to age of ? either age of aircraft or the utilization on the airplanes that are causing increases in maintenance that are escalating higher than our rates are escalating.
So, we knew when we bought ExpressJet that we had to get some efficiency and productivity and integration savings and but we also knew that in the near-term, the results would underperforms relative to our normal expectations, because we didn?t have tail risk.
We knew the rates were on the very low end of the market, but as the natural terminations happen and we expect to ? the original thesis I will say was to renew and extend contracts at what would then be market rates. Well, in the meantime, the system has changed.
The system has been spread out. It was very concentrated in Newark and Cleveland and Houston and now we are flying in Chicago and Denver, the utilization on the airplanes have gone up.
The spare ratios are not adequate. I mean, there is just a number of complicating factors here that have kind of exacerbated the problem and in the meantime, we haven?t achieved the joint collective bargain agreements that we need to get and that?s delaying some of the efficiency and productivity improvements that we needed to realize.
And so, look all of this has just, I mean, yes, the board has been talking about this for a long time and yes, as you can imagine, the board is not very patient with this and so, things are just moved to a higher priority and a sense of urgency and that's where we are.
