Catherine O’Brien: Totally fair. Maybe if I could just sneak one last one in, just on the leasing business, I think that revenue has been kind of flattish. We hear a lot about scarce availability of new tech narrow-bodies driving pretty attractive lease rates in that area of the market. Are you seeing — is it just that the supply and demand dynamics are different on the aircraft and engines that you were looking at that business? Or has like the objective changed and you think that you want to hold on to those and fly them in your own business? But would just love an update on what the trend line is there going forward. Thanks so much.
Wade Steel: Yes, Kate, this is Wade. The demand has been really strong. We’ve actually, between both leasing and selling some assets, we’ve had very strong demand in both our — in all types of our engines. It is flat on that line item. Some of the decrease is actually related more to kind of our ground handling business in that. The leasing is definitely — we see the pipeline out there and what we have in the future kind of lined up as definitely some increase going forward. We definitely see the supply chain challenges and there’s lots of people in the market that are reaching out for engines really at this point for help. There’s still some upside to that. We are working through that with them right now. But yes, we see good demand over the next couple of years for sure.
Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI.
Duane Pfennigwerth: Just maybe just to revisit some of the themes, so first on staffing and your kind of increased confidence, what are you seeing? Is this a function of things that you have implemented on the retention side? Or do you suspect that there’s maybe less competitive bidding at the moment from the mainline carriers? Is this a function of maybe adjustments to capacity plans out into early 2024?
Chip Childs: Yes. I would — Duane, thanks for your question. This is Chip. I’d take it to probably 3 separate things. One, you’re right, we have done a lot of things internally to try to make sure that we are the premier regional carrier for pilots to stay and build a long-term career. And we have seen some interesting things relative to attrition with captains with what we’ve done over the past 18 months, so that’s been a very positive impact, probably the most positive impact that we’ve seen in the last 12 months. And now looking to the future, when you start talking about overcapacity, we evaluate — to be candid, just the sheer numbers that the major carriers have hired and what they have today. I mean, I think you can look at publicly filed documents and see most of the major carriers have more pilots today than they did back pre-pandemic.
And now we’re having conversations about capacity. That’s an industry event that we have sort of seen a trend over the past 2 to 3 months which we expect is going to be even stronger over I think the next coming months. That’s the big one. And I guess the third one is the overcapacity because I think — I mean, it’s not to say that we’re still not out of the pilot supply problem because there still is a lot of time and cycles we have to produce to produce captains. All of the schools that we work with, our cadet program has never been stronger than it is today. We are getting very, very positive responses on first officers. But now we’re at that point when all these things align and we just have to continue to produce captains, to produce more productivity to produce captains which is what I think from now for the next 12 months is going to be key for us to do.
Duane Pfennigwerth: Okay, great. And then on the United agreement, maybe you could just talk a little bit about is it a function of the demand appeared or your ability to service that demand appeared? If we think about like the pipeline of incremental business where you’d be going out into the market and acquiring new aircraft, what’s the rate limiter on that? Is it sort of coming to the right terms with the legacy? Or is it your confidence in your ability to go execute that business?
Wade Steel: Yes, this is Wade. We’ve been working with United on this deal for a while, right? And United has been extremely supportive of us to continue to get a very good complete 175 fleet in their large dual-class scope with them. And so, we’ve been working with them for a while on this. The legacy was very supportive. They wanted this product in there. They could see that we were improving, that our demand is coming back, that we’re able to fulfill these contracts. And so I think between the confidence that United had and what we had in our abilities, we worked with them and we came to an agreement on this with Embraer and United. And we do have these deliveries over the next 3 years, right, the end of ’24, ’25 and ’26.
It will give us time to get our overall fleet utilization back where it needs to be as well. It was just a great 3-way agreement that we did. I would even add GE into that as well. All of our major partners that we had in this one was very good and it was a good transaction for us.
Duane Pfennigwerth: I guess just should we expect more of these over time is kind of the question? Is this a one-off? I mean it’s great to see it. Is this a one-off? Or do you think there could be more of these over the coming quarters?
Chip Childs: Duane, this is Chip. Man, I hope there’s a lot more of these over the coming quarters. But I think that you’ve got — I think for us, we’re realistic about the current environment. I think that when you talk about us getting 19 175s, this is a fantastic deal given the timing and the things we’re facing in the world. I will tell you there’s a lot of headwinds to having more of these though. First and foremost, interest rates are extremely high relative to aircraft financing. We still have, as we talked just earlier in your other question, you still have the development of captains. We think ordering more aircraft helps with that. We think it helps recruiting. We think it helps retention. But to the extent that you’ve got some challenges in making sure that we get the right pricing of aircraft and get them financed the right way, the beauty of it is, is we think at SkyWest we are by far the most competitive in the industry of being able to be creative to do more of these more than anybody else.
While I can’t promise that there’s going to be a lot of these coming, I can say that this is a very direct part of our strategy and we’re significantly better positioned than anybody else given what we can do with our balance sheet, the most amazing professionals in the industry and our creativity. I hope there’s more of these in the future. But there’s a lot of headwinds at the same time.
Operator: Your next question comes from the line of Savi Syth with Raymond James.
Savi Syth: Thanks for the follow-up. Can I ask on the prorate side, how many kind of aircraft are you doing on the prorate side? And is that now mostly the larger RJs or kind of just a mix there?
Wade Steel: Yes, Savi, this is Wade. We have somewhere in the range of 25 to 30 airplanes in the prorate side. I think you have probably seen publicly our Delta fleet has transitioned to a dual-class fleet primarily on that starting the first part of October. And so that has transitioned. The rest of it still is in a single-class 50-seat airplane.
