Good morning and welcome to the SkyWest first quarter 2014 results conference call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Brad Rich. Please go ahead, sir.

Thank you very much, operator, and thank you to all of you for joining us this morning. We are always very appreciative of your time and of your interest in SkyWest, Inc. and our operating companies. Let me begin this morning by making some introductions here of who will be participating in the call this morning. I have here with me at our SkyWest headquarters, Chip Childs, President and Chief Operating Officer of SkyWest Airlines; Brad Holt, President and Chief Operating Officer of ExpressJet Airlines; Michael Kraupp, our CFO and Treasurer; and Eric Woodward, our Chief Accounting Officer. We also have other members of our staff here in the room and participating with us this morning. We will begin the call by, I will turn the time back to Mike Kraupp. He will read our Safe Harbor on forward-looking statements. Following that statement he will then just continue and give a report of the financial performance for the first quarter.

Okay, thank you, Brad. We will be making statements during this conference call that are considered forward-looking. Such statements are based on our current beliefs, expectations and assumptions regarding future events and 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 hereof 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 this conference call or set forth in our 2013 Form 10-K and other reports and filings with the Securities and Exchange Commission. And now with regards to the results. First of all let me just thank you folks for being on the call and for your continued interest in our company. I will stay consistent with our past practice and basically use the press release to highlight some things for the quarter just ended. This morning we did report a net loss of $22.9 million or $0.44 per diluted share which was in line with our recent downward revision for expectations for Q1 that was provided on April 21, 2014, where we indicated a range for the anticipated loss of between $0.41 and $0.46 per diluted share. The downward revision was primarily provided to give insight into the additional weather related cancellations experienced after we gave some initial warning as to the negative impact of the severe weather already experienced from January 1, 2014 through February 12, 2014 and as we discussed on our fourth quarter results which was held in February 13,…

All right thank you. I would first of all like to add just a little bit more, an additional perspective into the impact of the weather on the first quarter. I know it's getting a lot of attention, at least with us, as you saw from both our prerelease as well as from Mike's comments. It is a significant impact. It is not certainly the only impact affecting our performance in the quarter but I would like to add some additional clarity. The impact of the weather on the ExpressJet operation is very disproportionate as compared to what you have seen in the market as other airlines have been reporting. It is disproportionately severe for several reasons. First of all, the concentration of the ExpressJet operation at hubs that were severely impacted by weather cancellations. When you look at what has happened throughout the country, particularly in some Midwest as well as East Coast hubs. For example, Chicago, Houston and Newark, that is where a significant portion of the ExpressJet operation is concentrated and had some very negative and severe impacts from the weather. Second impact is that our contracts in most of the ExpressJet operation do not allow for any reimbursement due to weather or ATC cancellations. And by the way, that is not exactly the same as in come of our other SkyWest type contracts and that also lends itself to some disproportionate impact. Item number three is kind of a continuation of that which is, as the block hours are lost due to these cancellations, it is just plain and simply lost revenue. We do not have like some of the major carriers the opportunity to move that revenue to other flights. It is just the lost billable block hour. All of that does create additional volatility.…

Thanks, Brad. The project of bringing the E175 on project over the last -- it’s been more than 15 months now -- is coming to a very strong close. We have taken delivery of our -- we took delivery of our first one back towards the end of March and we received official signature certification a couple of weeks ago from the FAA. It's been a project under the environment, as you all could imagine, with government shutdowns and challenges with FAA and that type of stuff that has been a tremendous amount of work for our people. Our team has been absolutely fantastic and we can say that it was pretty much a very, not without its problems but a flawless execution of making sure we can get that terrific aircraft on our certificate. A couple of things relative to the fleet today. We do have two aircraft on property today, 103SY and 105SY, and we are currently using them for heavy pilot training today. Our first date of service that we are initiating our of Chicago starts on May 17 and we have, what's been released publicly from United, we start in Regan National on the 17th of May. We go to start in Boston on the 19th of May. Minneapolis on June 5, Atlanta on June 15, and New York LaGuardia on June 23. I can certainly report that our team is very very excited about the prospects of what this aircraft does with our business model. We have fantastic amount of crews and people associated with it and we are very excited to continue to deliver that service for United here in the coming months. As far as pilot staffing is concerned I think that we are not completely out of the woods with the impact…

Okay. Thank you, very much. Let me just restate. We are very determined and very focused on making some corrections here in things to get the improvements that we have at least touched on at a high level. We have very specific and targeted plans for some improvement. The things that we have outlined relative to the new contract for the 175 and our expectations there and our plans for that airplane, we feel very optimistic about. As well as in our ability to get some of the corrections and improvements that we need. We are not only focused on but we are optimistic that we will get these changes made and the corrections made. Now I do want to make some, just a final statement regarding all of the employees of these combined companies. I mean we have just been through a very difficult period operationally and the men and women of these companies have worked very hard to perform, to keep these airplanes in the system operating and flying. And we are very appreciative and grateful for all of the efforts of this workforce. Having said that, we will conclude our prepared comments and we will open the lines for questions.

(Operator Instructions) And our first question comes from Michael Linenberg of Deutsche Bank. Please go ahead sir.

This is actually Catherine O'Brien filling in for Mike. My first question is, do you have any estimate on the financial impact of the E175s entering into service this month? Just trying to figure out if there'll be a positive impact on day one of service or the ramp up cost of the operation offset your revenue generated for some time?

Particularly, Catherine with the amount of pilot training we have with the fleet that’s coming, I think certainly with day one we do get good revenue generation from the first couple of aircrafts but we are not anticipating a significant amount of benefit on this until we get to into 2015. So this year we will see maybe a little bit for the end of the year but we are still developing this brand new fleet in our models and so I wouldn’t expect too much until we get into 2015.

Alright. Great. And then just one more on the ExpressJet contracts. You spoke about that. I think last quarter you said, and this quarter as well, that even in the case of extreme weather like you still don't get kind of past some of the difficulties you experienced for having to cancel flights. And I know that you said you were going to reach, try to come to some sort of negotiation with the major carrier partner there to get them more in line with your SkyWest type contracts. And if not -- and if you were unable to do so, you'd have to start taking those aircraft out. And so I'm wondering if this quarter's announcement to start taking down a lot of 50-seat capacity over the next year, if that is reflective of the fact that you were unable to come to an agreement with that major carrier.

Okay. It’s a very good question. We, as I did say last quarter, we are working specifically to get some, what I had mentioned, this contract corrections in place. The comments related to the reductions of the fleet need to be understood very clearly as these are just the normal scheduled retirements of aircrafts -- airplanes out of the contract that have just been in contract and therefore since -- I mean these are just the normal retirements that we are outlining here. So one of two things will happen with these aircraft. Either they will just naturally go away and expire, and by the way we have no tail risk on any of these airplanes. So a couple of questions then come in. The major partners that have these airplanes currently under contract want to renews and extent them, is the first question, which is entirely up to them. Second question, if they do, then the need to be extended at the rates and with the corrections that will make sense to us to continue to fly them. And if that happens then we will continue to fly them, if that doesn’t, then we will let them terminate. And either way, it should create some improvement to our financial performance.

And our next question comes from Savi Syth of Raymond James. Please go ahead.

On these 50 seat retirements I've been looking at it. I mean it's not too different from the plan that you outlined earlier in this year. But I was just curious, what do you think the reduction in profit loss would be as a result of the aircraft that are coming off contract this year? Like how much could we reduce the loss at ExpressJet?

Savi, again, it's a good question. It's one that we are not going to give a whole lot of clarity on today. Just because there is so much uncertainty surrounding any kind of -- I mean whether the airplanes actually go away as scheduled or whether they do get extended and at what rate. So I mean there is just some uncertainty about and probably is -- I mean we are working with the major carriers on this question, first of all about what the fleet plan really needs to be and how many of the airplanes they would like to just naturally retire or they would naturally like to extend and continue to fly. And even that question has not been resolved yet with the major carrier. So we are still working through all aspects of that and it's a little too early to start giving even ranges or estimates of the impact. But, look, we will keep you updated as we do through the normal course of working through our investor relations.

Got it. And then just on the same topic. I notice that the turbo props, they are going to be less -- five less by the end of the year than previously expected. I thought that was a part of the business that you were happy with and wanted to continue and I was curious what the decision point was behind that.

Yes. This is an interesting situation for us because we have been expecting for a number of year now to let this fleet just get to a -- you know continue to decline and get to a point where it just didn’t make enough concentrated sense to continue to flying that fleet. But it just continues to be productive to the system and continues to make money. So we are going to continue looking for ways to use the airplane at least for the time being.

Did you do have it reduced in this year. Did anything change?

Did anything change? No, not anything other than just the natural schedule of the fleet plan.

Okay. Got it. And then if I might ask just one last question. The contribution from the mismatch of the timing of [reduction] (ph) of the revenue and the cost on the United CRJ200 maintenance. It was larger than I would have thought, maybe by $3 million in this quarter. Is that a timing issue and you still expect only kind of a, or similar trend to last year or how should we think about that?

Look, generally the answer to that question is, we had a few airplanes that were naturally scheduled to terminate that we found uses for the airplane. So as we plan our maintenance to be timed to (indiscernible) on the natural expiration. And then we decided to keep the airplanes and do some work and refurbishment, make some investment in the airplanes to keep them flying and what we think our productive usage of the airplanes, it increased our maintenance expenses and basically it is that $3 million gap. But that’s just related to about four airplanes that we decided that were scheduled to retire that we kept in service and where we found productive ways to use the airplanes.

That answer is on the United CRJ side or am I confusing with some of the other.

We are just taking these airplanes -- are you looking specifically at the mismatch in revenue and expense?

On the United CRJ200.

Just on the United 200?

Yes.

Okay. So, Mike, you have--

Yes. Just real quick Savi. Actually with regards to our plan. We are actually very close to our plan. We did show a positive on a year-over-year basis. And for the year, which was the other part of your question, we actually do show a tiny bit of improvement. It is not a material difference from the positive amount that we had last year. And so, again, we were very close within the first quarter.

And our next question comes from Helane Becker of Cowen. Please go ahead. Helane Becker – Cowen and Company: Thanks for the time. Just a couple of questions. Can you just say how profitable, or is the prorate business profitable? And if it is, can you move more aircraft into that business where you have more control and maybe can get better results? Is that possible?

So, Helane, look, as consistent with past practice we have been very hesitant to give specific P&L performance or margin performance of the prorate flying and we are going to keep it that way even today. I will answer the question generally to say, yes, the prorate flying is profitable but we have got to be very careful with that business model. It involves to a large extent just the life cycle of the airplanes. We are trying to manage reducing ownership costs with increasing maintenance cost and then making sure that we don’t subject the overall model to just more and more volatility that comes with the prorate flying. So, yes, it's doing well today. It’s productive. The other thing we are trying to make sure that we do is keep a significant amount of fleet flexibility in that prorate model. So when we can do that, operate that system with at least a material part of the system that has very short-term flexibility relative to the ownership of the fleet, then it makes sense for us to continue to develop the model. But we have to be very careful with it and make sure that we don’t subject the overall model to just increasing amounts of volatility and risk. So those are things that we are trying to keep in mind. And again, in that answer I certain alluded to the fact that we have at least a material part of that fleet that has very short-term ownership commitments. Helane Becker – Cowen and Company: Got you. Okay. And then the other question I had is, I suppose, I don't know if you can do this, but of the decline in cash, can you say how much was related to the ExpressJet losses?

It is basically -- you know that entity doesn't generate cash in and of itself, so when you look at the losses, for example, that were over plan, that ate up additional cash. Helane Becker – Cowen and Company: Okay.

Helane, another way to say that, we don’t own the majority of that fleet. I mean that’s all, as you know, (indiscernible) or United has the ownership of the majority of the those airplanes in that model. So basically the operating losses are cash losses. Helane Becker – Cowen and Company: Okay. I was going to ask that question. Who had the residual value risk on the 61 aircraft and you answered that. So that was helpful. And then the other question I have is, I think in the press release you talk about earnings or operations getting back to a more normalized level and nobody wants that more than me, given how much I actually fly in and out of Newark as, Mike, I think you know with all the comments I've made about the flight cancellations that ExpressJet has taken. And you even mentioned 2014 was worse than '13 which was worse than 12. Have you guys talked to, in great detail, United about, I don't know how much of the 2,300 flights a day your schedule includes of ExpressJet -- includes United. But that's an incredible amount of flying for 50 passenger aircraft to do. And I'm just wondering, do they give you any sense of, a, what the right size of that fleet is, b, if this kind of weather is normal for us going, for this country going forward, what can be done really to mitigate the frustration that you -- because I know your passengers have, but that you also and your employees must have in running this operation which has just got to be taking up an incredible amount of management time.

Okay. Very insightful observation Helane. And, yes, you are right. And so I guess I will just say, yes, generally we agree to what you jus said and show frustration. But, no, I mean look, this is where we need to be very focused on the needs of our major carrier, number one. And listen very clearly to their objectives and what they indicate as their preferences for the size and volume of flying. Then we need to be proactive in giving our assessment, our analysis, our input into the strategic development of the network. And we will be more proactive and more aggressive on that then we have been to date. So I don’t know how else to answer that question but... Helane Becker – Cowen and Company: No, I think that’s fair. I am sorry?

In some way it's a delicate balance because we are trying to do the very best that we can to be good partners and to fly the schedules that our major partners feel are important for them to fly. At the same time we have to do -- we have to do the flying in a way that will make sense both financially and very importantly, from a reliability standpoint. Helane Becker – Cowen and Company: Right. No, I got you. It's just, I don't think there's much you can do other than what you're doing and being more aggressive at it so that you're not as frustrated as what's been occurring over the past, I would say, really two years. I don't necessarily think United's been the best partner, but that's that. Anyway, thank you very much for your answers.

Okay. Thank you, Helane. We think they have been a good partner and we just need to work more aggressively and more cooperatively with them in designing schedules that can be flown reliably.

And our next question comes from Duane Pfennigwerth of Evercore. Please go ahead sir.

Just looking at your -- maybe we could just take a step back here. So I assume that the target audience for these calls is equity investors and if that’s the case, what is the investment thesis at this point in SkyWest? When do you think you are going to be in a position to expand margins again and what is the real earnings power of this business?

Okay. So I think you are definitely right in the target audience for this call. And let give at least some initial thoughts relative to your question. And by the way I wish I could answer this question with a lot of detail and a lot of specificity. We have some very targeted and very specific objectives about what the return should be on this business model. And we have developed those based on the risks of the model, we are trying to do it with a full awareness of the industry in which we are operating and all of that. Now the question to me is, is when we will -- rather then answer the question as to the exact margin, I mean we are not going to be in the business at least right now of giving EPS targets or margin percentage estimates or anything like that. What I will say is that we have very specific targets that we think will meet ours and our shareholders objectives. Recognizing that the equity groups you are talking about have differing but yet very similar, I would think, return expectations of us. The question is, over what -- obviously, we have got to accelerate our return to normal expected profitability. With some of the things that we are trying to articulate today, we are making both some leadership changes, we are making some structural changes in the network. We are making, we have got a very aggressive discussion going on to make some contract corrections. And then we have the fleet itself. And so the fleet and the structure and composition of the fleet itself is a very important part of this. And look with the ExpressJet operation, we are now at a point in that contract where the airplanes…

Appreciate those detailed thoughts. If I could maybe just ask a shorter-term question. Unless I'm wrong here, it looks like excluding weather your margins were down year-to-year. Based on the guidance for ASMs, it looks like it's down 10% year-to-year in the second quarter. Should we continue to expect that margins are down year-to-year in the near term, or when should they begin to expand?

I think a couple of things. First of all we have some unusual things that I think are near term relative to the cost of crews. We increased some maintenance cost expenses for some reasons that I articulated, that I think are more short-term in nature and more onetime events. And at the same time we have some kind of accelerated and advanced cost in anticipation of the E175s coming on, which I think is a short-term event. As that passes and we get towards the end of this year, then we start to realize the earnings power of a new contract and a new fleet type. And as Chip already articulated, there are still going to be some integration and upfront cost of that system of the new 175 platform. But as we get to the end of the year and clearly into '15, then we think things will, you will see a noticeable change. And the, by the way, that will happen both as we feel like the 175 will be a very productive fleet and look we think it's a very productive model, the rate agreement and all of that that we have on those airplanes. And then as things start to improve either through the rate corrections or the reduction of the fleet at Express, all of that we think will create both momentum and some expansion of the margin.

And our next question comes from Glenn Engel of Bank of America. Please go ahead, sir. Glenn Engel – Bank of America: One is a follow-up to the last question. Why did the ASM forecast drop from 9.8 to 9.1 in the second quarter? It seems like a lot.

Well, obviously it was the end of the year. Based on, well on the profit planning process I should say, based on some expectation. But then to the extent that our partners changed schedules etcetera, we simply are building that based on the known schedules that our major partners are giving us. So that scheduling is obviously in their hands and the ASM production represents those scheduling changes. Glenn Engel – Bank of America: I guess that surprises me that it changed so much in two months.

Well, again, it's based on our partners, what our partners are -- how they are viewing the fleet, how they want to utilize the fleet. And so I don’t know that I have anything different other than to offer, you know, these are the results of what our schedule partners have asked for us to do. Glenn Engel – Bank of America: Is this partly because the schedule reliability because of the weather and the changes in the rest rules in the first quarter were so bad they decided to proactively just have less flying in the second quarter?

No. I mean, look, I think first of all we have a very unexpected kind of seasonal thing here. I mean March for example was always a very strong month from a scheduling standpoint with a lot of block hours, a lot of utilization on the airplanes. April and May are not quite as strong in utilization of the fleet. And then we get into the summer and the utilization picks back up. And with us, at the same time the heavy utilization picks back up in the summer months, we are going to see some reductions of the fleet. So it's just a combination of all of those things and the numbers that we have put out are reflective of all of those facts. Those that are creating a little volatility in the block hour production but that is what we expect it to do and it is all based around the size of our fleet and the schedule of the majors. Glenn Engel – Bank of America: The permanent differences, is that a $4 million type number a year? What's the size of permanent difference on the tax rate? I was thinking $4 million pretax, is that the impact from permanent differences?

Yes, we think that’s in the hunch, yes. Glenn Engel – Bank of America: Okay. And then finally, I guess one of the problems is you can be dropping a flight that loses money, one of the 50-seaters. But then those 50 -- the flights that are dropping aren't going to cover the overhead of the other flights. So does money losing flights really help the profitability that much if we lose the coverage of the overhead?

Okay. Good observation. Look, it's our responsibility to manage the overhead at the same time. So, yes, it's a complicated and it's issue and it's not going to be easy but that is our expectation. Glenn Engel – Bank of America: And finally, again, the level of the good guy this year in the CRJ200 reimbursements versus expense. Are we in a several year process where it's going to stay at this level or should it be dipping back down again in a couple years from now?

No. We have gone through the major bell curve and cycle with regard to those CRJ200 engine overhauls so we have got the bad guy, if you will, behind this. It is a positive, was a positive last year. It's slightly higher this year. And so outside of that we don’t expect for that situation to turn dramatically negative like it had done before. Glenn Engel – Bank of America: Will the gains, spreads, narrow next year or will it remain at something closer to this level?

We would expect that it would initially stay close to this level.

(Operator Instructions)

Operator, do we have any additional questions?

It appears at this time we have no additional questions.

Okay. Very good. Well, we have kept you on the phone for a little while and we want to be respectful and sensitive to the time. So we thank you for your participation. We thank those of you that have asked insightful questions and we again are appreciative of all of you that have participated in the call. We are grateful for all of the stakeholders of this company and for all the efforts, the interest and all of the efforts. As a leadership team we are committed to remaining very focused on the improvements that we know need to be made. And we are committed to making them. And with that again we will thank you for your participation and we will go ahead and close the call. Thank you.

The conference has now concluded. Thank you for attending today's presentation, you may now disconnect your lines.