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Skywest Inc (SKYW 2.77%)
Q4 2018 Earnings Conference Call
Jan. 31, 2019, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good afternoon and welcome to the SkyWest Incorporated Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). I would now like to turn the conference over to Rob Simmons, Chief Financial Officer. Please go ahead.
Robert J. Simmons -- Chief Financial Officer
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 Steel, Chief Commercial Officer; Eric Woodward, Chief Accounting Officer; and Mike Thomson, SkyWest Airlines Chief Operating 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 J. Woodward -- Chief Accounting Officer
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. 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 2017 form 10-K and other reports and filings with the Securities and Exchange Commission.
With that, I'll turn the call over to Chip.
Chip Childs -- Chief Executive Officer, President and Director
Thank you, Rob and Eric. Good afternoon, everyone. We appreciate your joining us on the call today. The fourth quarter completed a strong 2018. We're pleased to report solid continued progress on our key objectives to reduce risk, enhance fleet flexibility and maintain strong cash flow. We are focused on delivering on our commitments and executing with discipline. As our press release outlines, we continue to make great progress in all of these areas. With the completion of the ExpressJet sale to ManaAir this month, we successfully mitigated a significant risk to our model. We believe our ability to focus on one operating entity in SkyWest airlines will help us better achieve our objectives and deliver an exceptional product for our partners. As we've discussed in previous quarters, another component of our risk reduction strategy is to further reduce our utilization of expensive and inflexible leverage leases across our fleet. As we outlined in our press release, we are executing early lease buyouts on 52 aircraft this month as we continued to delever our balance sheet and reduce tariffs.
Rob will talk more about that in a minute. Our operating performance remained strong during the fourth quarter with SkyWest Airlines delivering 99.9% adjusted completion on over 200,000 flights during the quarter. This caps off the year of SkyWest producing top tier reliability for the entire 2018 year, a year in which we operated the most departures in our history. Also during the year we became the first airline to launch and all-electronic maintenance log as we work to stay on the leading edge of our industry.
SkyWest has been named one of Fortune Magazine's Most Admired Companies in 2019 and is the only regional airline on that prestigious list. We attribute that distinction and our operating credibility to our incredible team of nearly 14,000 professionals. And I want to thank them for their great work across our operation each and every day. That credibility helped us secure multiyear contract extensions for 51 aircraft under flying agreements with Delta, as well as new contracts for nine additional E175 aircraft. SkyWest will purchase these E175 aircraft from Embraer as we removed 9 CRJ900s from our Delta operations in the coming 18 months.
Some of these CRJ900s will be leased to Air Canada and some will be returned to the lessor. As we discussed last quarter, we believe there is still good opportunities for earnings growth in 2019 and 2020 with smaller incremental flying agreements and a strong balance sheet that enables us to create innovative opportunities within existing scope limitations. This includes non-flying and lease opportunities as we demonstrated this quarter.
To be clear, any leasing business we pursue is and will be within our current platform of assets and as the largest operator of these assets in the world these are opportunities we are uniquely positioned to develop. Wade will talk more about that in a few minutes.
SkyWest people remain essential to our collective progress and with the finalization of our pilot agreement in the fourth quarter we now have multi-year agreements with all employee work groups. Pilot hiring and recruiting is running more than 20% above last year's levels and is another risk area we feel has been reduced meaningfully over the last year.
So with the January 22nd closing of the ExpressJet sale, combined with the latest fleet announcements, flying contract extensions and the leverage lease buyout, this reduction of risk gives us better predictability and visibility for the future. We remain very focused on sustainable opportunities that position us for long-term success. I again want to thank our nearly 14,000 aviation professionals for their excellent work during the fourth quarter. Rob.
Robert J. Simmons -- Chief Financial Officer
Today, we reported net income of $67 million or $1.28 per share for the fourth quarter of 2018 compared to adjusted net income of $43 million or $0.81 per share in Q4 2017. For all of 2018, we reported net income of $280 million or $5.30 per share compared to adjusted net income of $182 million or $3.43 per share from 2017.
As a reminder, the adjustment to the 2017 numbers was to take out a large gain related to the tax law change. Pre-tax income of $91 million during Q4 was up 33% from Q4 2017. Revenue was $803 million in Q4 ‘18, up $42 million from $761 million in Q4, 2017. This increase in revenue included the net impact of adding 39 new E175 aircraft since Q4 2017, partially offset by the removal of 48 less profitable aircraft over the same period. Our total fuel costs per gallon averaged $2.66 during the fourth quarter, up from $2.25 per gallon in Q4 2017. The line item in our P&L for aircraft fuel was $7 million pre-tax higher than a year ago, reflecting the higher rate paid under our pro rate business model. Just a reminder that approximately 90% of our model is not subject to fuel risk. Our effective tax rate in Q4 was 26% and for the full year it was 23.5%. We continue to expect our tax rate to be approximately 24% to 25% for 2019 as a whole.
Let me say a couple of things about our balance sheet, an important point of differentiation for us. We ended the quarter with cash of $689 million, down slightly from $705 million last quarter. We issued $159 million in new long-term debt during Q4 2018, financing eight new E175s. Total debt as of December 31, 2018 was $3.2 billion, up from $3.1 billion last quarter. SkyWest used $28 million in cash and deposits toward equity for new planes and $39 million in other CapEx. Normal non-aircraft acquisition, capital spending in 2019, should continue to run in the $25 million to $35 million per quarter range. With the delivery of nine new E175s expected to be spread over 2019 and 2020, we plan to invest $40 million of our own capital and raise approximately $180 million in new term debt by the middle of 2020 for these planes.
We expect that by the end of 2019 our debt will be below $3 billion, down from where we are now because of the close to $350 million in normal principal payments embedded in our fully amortizing term debt by the end of 2019, offset by approximately $100 million in new debt for the 2019 E175 deliveries announced today. Absent any additional aircraft orders, the $3.2 billion in debt, where we are right now is likely a peak. We expect that in 2019 and 2020, we will continue to delever our balance sheet by paying down debt in the neighborhood of $300 million to $400 million per year.
But let's be clear, debt reduction is just part of the story. Subsequent to year-end, two important things happened, we closed on the ExpressJet sale and we deployed $110 million in capital to buy 52 aircraft out of an expensive inflexible leverage lease structure. This lease buyout transaction replaces cash rent expense with non-cash depreciation expense, helps us avoid spending down the road on lease return conditions, meaningfully lowers tail risk out to 2024 and it's immediately accretive to earnings.
At the end of 2017, SkyWest's total future lease obligation was over $700 million. After the removal of ExpressJets lease obligations and this leverage lease buyout, I would estimate our current future lease obligations to be down to approximately $400 million. During Q4, we repurchased $29 million in stock under our three-year $100 million repurchase program authorized by the Board in 2017. We still have $25 million in authorization remaining under this program and expect to fully utilize it. We feel good about how we are positioned going into 2019. Last quarter we discussed that we could see high single-digit baseline growth in earnings per share in 2019 over 2018. But this expectation did not necessarily capture the upside potential from other initiatives. Well, including the accretion from the leverage lease buyout announced today and other leasing and contract opportunities which Wade will discuss in a moment, we expect that off the earnings per share base of $5.30 for 2018, we could now see low double-digit growth in 2019, but we would still expect 2019 EPS to have a five in front of it.
As our spending on new aircraft goes from $160 million in 2018 to something closer to $20 million in 2019, our cash generation is set to increase dramatically. Cash at the end of Q1 should be in the $500 million range as we deploy $110 million for lease buyouts and other items. But absent any new investment opportunities, cash should be back in the 700s by year-end 2019. This visibility to future cash flow gives us the confidence to continue to make disciplined investments to create shareholder value. When and if new investment opportunities come, we will be ready with a strong and liquid balance sheet. This future capital deployment could include organic growth opportunities in contract flying, pro rate flying or leasing, as well as opportunities to buy our way out of other inflexible and expensive leasing structures prior to maturity.
In addition to organic growth opportunities, of course, we will also continue to look at returning capital to shareholders via share repurchase and dividends.
Wade will now give you some color on the fleet movements and other commercial opportunities and initiatives. Wade.
Wade Steel -- Chief Commercial Officer
Thank you, Rob. I'll review the new contract signed, discuss the changes to the fleet and related flying agreements and then we'll walk through the implementation of these changes, and our new leasing opportunities. During the fourth quarter, we entered into an agreement with Delta to acquire and operate nine new E175s under a nine-year term.
We expect to take delivery of the first five aircraft during the first half of this year and the other four during 2020. We expect to remove 9 used CRJ900s from our Delta contract as the new E175s are placed into service. Four of those CRJ900s will be returned to the lessor, the other five CRJ900s will be leased to Air Canada. You may recall that we had a number of CRJ aircrafts set to expire this year and next year under our Delta contract. During the fourth quarter, we extended 32 aircraft, including 15 CRJ900, 3 CRJ700s and 14 CRJ200s from our legacy Delta CRJ contract. The CRJ700s to CRJ900s were extended through December 2022 and the CRJ200s were extended for an additional one to two years. We also extended the term on the first, 19 E175s under contract with Delta from nine to 11 years. 2018 was an incredibly busy year for SkyWest and this work sets us up for success for many years to come. During the year, we received 39 E175s, 30 are under a nine-year contract with Delta. The other nine are under a 12-year contract with Alaska. At year-end, this puts our E175 fleet to a total of 146, 65 under contract with United, 49 with Delta, 32 with Alaska.
As I mentioned, we expect to receive nine more E175s for Delta during 2019 and 2020. By the end of 2020, we expect to have 58 E175s under long-term contracts with Delta. We are also scheduled to take delivery of three E175s for Alaska during 2021, bringing our Alaska fleet total to 35. We also took delivery of five new CRJ900s for Delta during the year. During 2019 and 2020 we will take delivery of 15 additional new CRJ900s, all under long-term flying agreements with Delta. Demand for 50-seat flying remains very strong and as a result of that demand last quarter we reached an agreement with United to extend 60 CRJs for an additional three years. With the extension of these and other legacy Delta CRJ fleet, this means 80% of our contract flying now goes beyond 2020. We remain confident in our ability to find opportunities for those planes with contracts expiring before the end of 2020. As we completed the Express jet wind down for American and Delta flying prior to our completed ManaAir transaction, we removed the remainder of the 30 previously ExpressJet owned CRJ700s from Delta and American service.
For the short term, we expect to retain the majority of these aircraft under our current American flying agreement. However, since we own these aircraft with very little debt remaining, we are evaluating various options for these aircraft, including selling them, operating them under contract and pro rate agreements, leasing them to third parties or utilizing or selling their parts. We have been able to place 17 engines belonging to these aircraft under lease agreements, 13 of which are under long-term leases with Delta Air Lines. We continue to see opportunities in our leasing business. We have leased 16 CRJ200s to the new ExpressJet for up to five years. We also entered into a six-year lease with Air Canada for 5 CRJ900s. These aircrafts start to transition to Air Canada during the second and third quarters of this year. Demand for engines and aircraft is high and we believe there are strong, short and long-term leasing opportunities. As Chip mentioned any -- any leasing business will be within our existing platform of assets. As I've outlined, 2018 was a very productive year focused on setting a strong foundation for the next several years. This fleet movement re-fleeting and successful sell of ExpressJet is part of our broader strategy to reduce our overall risk and improve our model. The net impact of all these changes leaves us with a single, highly efficient airline with significantly lower risk and positions us well for 2019 and beyond.
Okay. Operator, we're ready for Q&A now.
Questions and Answers:
Operator
We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Savi Syth with Raymond James. Please go ahead.
Savi Syth -- Raymond James -- Analyst
Hey, good afternoon, everyone. You guys have been definitely be busy end of the year and at the beginning here. Just on the fleet count, end of the year was about 21 more aircrafts than previously projected. Is that related to the aircraft that you've now confirmed with Delta? Or what led to higher aircraft count at the end of the year?
Wade Steel -- Chief Commercial Officer
Yeah. So the majority -- Savi, this is Wade. So the majority of those aircraft that are in there as of year-end are the CRJ200s that ExpressJet was operating for United as of year-end. That's what the increase was.
Savi Syth -- Raymond James -- Analyst
Okay. And I have a bunch of smaller questions related to two different movements. So the -- with the 70 engines that are under lease agreements, does that mean that by mid-2019 you just still have only about 13 CRJ700s that you have to figure out what you want to do with? Is that correct?
Wade Steel -- Chief Commercial Officer
Yes, Savi, this is Wade again. So, yeah, we have 30 of those airplanes, as I said in my script. The majority of those airplanes are currently flying under agreements with American. The engines are being leased and so there's just a, as you said 12 to 13 aircrafts that still we're looking for homes for.
Savi Syth -- Raymond James -- Analyst
Got it. And one last question and then I'll jump back on the queue. Related to these, the leasing opportunity that you have, is this one where, you're just going to work with the fleet that you have or would you consider going out if the opportunity arises, going out and kind of buying aircrafts specifically to lease, like lease out brand new aircraft to any airlines that want to?
Chip Childs -- Chief Executive Officer, President and Director
Thanks, Savi. This is Chip. Just real quick, relative to that point, I think where we are today, as we start a lot more external leasing activity is first and foremost it's important to remember our objective is to utilize assets that are already within our existing portfolio, that's the number one part. Most of what we're incrementally talking about on the call today is assets that we already have. There's no question that if there are additional assets available for us to purchase within the existing platform, we would be very open to evaluating that along with other opportunities to deploy them either through leasing or with flying.
The objective of this entire leasing activity is to make sure that we continue, we talk a lot about fleet flexibility and we find that this is another very strong tool that we can utilize to meet the needs of our partners, and maybe a multitude of different ways by deploying these assets that are already within our existing platform. So we will patiently monitor the market and some of the demand for this stuff and keep you updated in the future if there's any new movement relative to this model.
Savi Syth -- Raymond James -- Analyst
Okay, appreciate it. Thank you.
Operator
The next question comes from Michael Linenberg with Deutsche Bank. Please go ahead.
Michael Linenberg -- Deutsche Bank -- Analyst
Hey, so you talked about the leasing of the engines, the leasing of the airplanes to ExpressJet, to CRJs, and then the CRJs to Air Canada. How are you going to depict this in your P&L? Is there going to be like a revenue from leasing and also the associated expenses?
Robert J. Simmons -- Chief Financial Officer
Hey, Mike, this is Rob. So this sort of activity will all be reflected in our leasing segment.
Michael Linenberg -- Deutsche Bank -- Analyst
Okay, then my second question, with all of the extensions or renewals that you completed with Delta, is it fair to assume that the economics of the extensions or renewals is similar on average with what you had in place previously?
Wade Steel -- Chief Commercial Officer
Yeah, Michael, this is Wade. We've obviously been working with Delta on this. They're very consistent with what we've had. Obviously adjusted for additional pilot cost that we have. But yes.
Michael Linenberg -- Deutsche Bank -- Analyst
Okay, great and then just my last question. Now that you've jettisoned the ExpressJet business and you gave us the guide for 2019 and it's a sizable increase even on this higher base given the strength of the fourth quarter. When I think about the elimination of ExpressJet and as I recall, I believe it was a separate dispatch, a separate COO, separate executives. There's clearly some cost savings here in running only a single entity rather than two? Is that partly what's helping to drive a better number and can you give us a sense of maybe what that P&L benefit is of being just the single stand-alone entity instead of trying to manage two different operations?
Chip Childs -- Chief Executive Officer, President and Director
Yeah, Michael, this is Chip. I appreciate the question. It's a great one. I think there is a lot of, a lot of opportunity here with a single carrier. I mean it's been well over a decade since SkyWest was on its own, and there's no question that a significant portion of why we strategically made this decision was no question efficiency, no doubt, increased focus on being able to execute with such a fantastic operation that SkyWest has, as well as to focus on cost and deliver what our, what our partners want.
There's also a cultural aspect to it. I think that that would be, you'd be hard-pressed to find a culture as strong as what SkyWest Airlines has along with outstanding aviation professionals. And so from our perspective, the transaction is just a couple of weeks behind us, but our strategic focus moving forward is going to be, I think significantly intangible and down the road continue to reduce risk and provide some good solid opportunities for what the operation that SkyWest Airlines can provide.
Now relative to guidance, I think that Rob gave some pretty good guidance within his script for 2019. And I think that all of that that we've discussed relative to the transaction is largely embedded in that guidance.
Michael Linenberg -- Deutsche Bank -- Analyst
Okay, great. Very good. Thanks, Chip.
Operator
The next question comes from Duane Pfennigwerth with Evercore ISI. Please go ahead.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Hey, thanks. Just to follow on where Mike left off. Would you be able to provide like a pro forma revenue for 2019 ex ExpressJet?
Robert J. Simmons -- Chief Financial Officer
Hey, Duane, it's Rob here. So, as you know, on 21st of January, we filed an 8-K that had some split out of that, but just in terms of a high-level ExpressJet contributed $564 million in revenue during fiscal 2018 and had a segment level loss of $16 million.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Okay, that's great. And then on Air Canada, is that just aircraft or is it aircraft on an outsourced basis? What is the total opportunity there?
Wade Steel -- Chief Commercial Officer
Yeah so, Duane, this is Wade. So this is just aircraft and engines, we will not be doing the flying. I think they have selected another operator to do that and we've got plenty of flying with our four major partners.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Thank you. And then just for my last one on maybe on a per aircraft basis. Can you just walk us through the P&L impact, your accounting impact of why this is a benefit for you to buy these out? And thanks for taking the questions.
Wade Steel -- Chief Commercial Officer
Sure. On the leverage, I assume you're referring to the leverage lease buyout. So --.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Exactly. Right.
Wade Steel -- Chief Commercial Officer
We're not going to get into too much granularity on that, but I can say that the money, the capital that we're deploying against that has got a nice double-digit sort of ROI characteristic and should contribute in the neighborhood of a quarter of EPS a year.
Duane Pfennigwerth -- Evercore ISI -- Analyst
Thank you.
Operator
The next question comes from Helane Becker with Cowen and Company. Please go ahead.
Helane Becker -- Cowen and Company -- Analyst
Thanks, operator. Hi, everybody. Thank you so much for your time. Couple of little things, one is you mentioned your pilot hiring as being on track and so on. Can you just talk about retention?
Chip Childs -- Chief Executive Officer, President and Director
Yeah, Helane this is, Chip. So, as we mentioned, our pilot hiring this year is as good as it's ever been. Retention, our anticipation for 2019 is about flat compared to what it was for last year. We do certainly monitor that extremely closely as well as the pipeline of pilots coming in and I think net-net, between the two, we feel like we're in a very, very good position going into 2019, where we can assist partners real-time in any needs that they may have throughout the year and also completely on or all of our existing flying agreements throughout the year.
Helane Becker -- Cowen and Company -- Analyst
Great. And then my other question is probably one for Rob with the purchase of the aircraft off lease do you -- would you have a write-down to the fleet or should we be looking for anything like that?
Robert J. Simmons -- Chief Financial Officer
No, nothing like that, Helane.
Helane Becker -- Cowen and Company -- Analyst
Okay. And then my last question is I think you might have answered this. Actually, you were talking about having stubborn lease agreements. Can you just clarify what you were saying about that?
Robert J. Simmons -- Chief Financial Officer
I think what I said was expensive and flexible and so there were a couple of pockets (inaudible) we were sort of attacking, one of them we got done and another one, again, we're not going to give up on, but I wouldn't expect that that will happen in the next year, but I think still reflects a longer term opportunity as we get closer to maturity on that. We'll continue to work on that piece of it. But we were delighted to get the piece done that we did.
Helane Becker -- Cowen and Company -- Analyst
Okay. And you can't say how many, right?
Robert J. Simmons -- Chief Financial Officer
It was 52 airplanes in the deal that we got done today and again the capital deployed was $110 million.
Helane Becker -- Cowen and Company -- Analyst
Okay. Got it. And then one, if I can just sneak in, one last question, do your partners ask you what you're doing in the area of carbon offsets and sustainability and stuff like that, or do they just provide that to you with the jet fuel that they're providing to you and making your employees like, for example, United and their Eco-Skies program. Do they follow up with you in that area at all?
Chip Childs -- Chief Executive Officer, President and Director
Yeah, I think, Helene this is Chip, just real quick. As we work real time with our partners, that's a topic that we absolutely have a lot of conversation about. Anything that we can do in any platform we have relative to flight procedures, for fuel savings, anything from an environmental perspective, I can say without a doubt that our partners are very engaged with us as we want to be naturally anyway, in any type of dialog that we can have some environmental responsibility together in a partnership and I'm actually very impressed with how that process works with our partners.
So that's a long answer to the word of yes.
Helane Becker -- Cowen and Company -- Analyst
It’s okay. It is really helpful. Thank you.
Operator
The next question comes from Catherine O'Brien with Goldman Sachs. Please go ahead.
Catherine O'Brien -- Goldman Sachs -- Analyst
Good afternoon, everyone.
Chip Childs -- Chief Executive Officer, President and Director
Hi, Katy.
Catherine O'Brien -- Goldman Sachs -- Analyst
Hey, guys. So maybe just one more on this new leasing part of the business. Should we be thinking about these leases as closer to breakeven covering the cost of ownership on these aircraft or should we be expecting a decent profit on this, on this part of the business?
Chip Childs -- Chief Executive Officer, President and Director
Katy this is Chip, I would, in a very general sense say that this is not an activity to try to breakeven. These are in our view, opportunities, we do have a fair amount of assets, each asset that we have talked about relative to this opportunity, we can fly it or we can lease it or we can even sell it. So in my view, I would, view this as a profitable opportunity as we move forward within our existing asset base that we have.
Catherine O'Brien -- Goldman Sachs -- Analyst
Okay, got it. And then maybe just thinking about like a few of the puts and takes that we've seen change since you last gave the high-single digit, now we're low double digit guidance. Seems like based on Rob's characterization of the buying of the aircraft on lease being about a quarter of EPS a year. It seems like that might be the largest chunk of that change from some quick math. Is that the way to think about it? Or should we be thinking about more of an equal split between some of the new aircraft at Delta, the contract extensions. Just how to think about some of the changes since you last guided?
Robert J. Simmons -- Chief Financial Officer
Yeah, Katy it's Rob here. So I think that the leverage lease buyout is probably slightly more than sort of half of the delta and some of the other Deltas related to the opportunities that Wade was talking about in the leasing and commercial side of the business.
Catherine O'Brien -- Goldman Sachs -- Analyst
Great. And if I could just sneak one quick last one in. Should we still be thinking about your E175 line being the most profitable in your fleet? Or have some of these new and extended contracts with your partners on other aircraft caught up profitability wise?
Wade Steel -- Chief Commercial Officer
Yeah, Katy. This is Wade. We don't get into fleet level profitability but there we're making money on all of them today.
Catherine O'Brien -- Goldman Sachs -- Analyst
Okay. I appreciate the time. Thank you.
Operator
Your next question comes from Steve O'Hara with Sidoti & Company. Please go ahead.
Steve O'Hara -- Sidoti & Company -- Analyst
Hi, good afternoon.
Robert J. Simmons -- Chief Financial Officer
Hey, Steve.
Steve O'Hara -- Sidoti & Company -- Analyst
Hi. Maybe just relative to your original guidance that you had provided. How many of the things that seem to be impacting the improvement, I guess net, so the pilot contract, I would assume would be a negative on that, the sale of ExpressJet and then the lease buyout. I mean how many of these things were kind of contemplated, but may be factored in less than expected or something like that, when you guided previously?
Robert J. Simmons -- Chief Financial Officer
So Steve, I think that with respect to our original guidance that clearly contemplated the additional pilot contract costs that we did last year. And I think largely is related to sort of what we said we get some of the accretion that we get from the leverage lease buyout as well as some of these incremental leasing opportunities.
Steve O'Hara -- Sidoti & Company -- Analyst
Okay. And then you talked about the pilot hiring and things like that being as strong as it's ever been -- and I maybe Helane asked this, but I missed it. Just on the attrition rate, I mean has there been any increase in the attrition rate or is that still kind of where you think it should be. I guess I'm just wondering, I mean, it seems like you're taking more aircraft from Delta, but that should be slowing relative to what you did last year I guess which was a very big year in terms of taking aircraft.
Chip Childs -- Chief Executive Officer, President and Director
Yes, Steve, this is Chip. Again it’s a good question. With strong pilot hiring and we take a look at the retention of our pilots and you asked question that, where we think it should be. Well no, it's not where we think it should be, we don't think we should have any attrition, but from the perspective of what we have the reality to deal with, with our major partners hiring so many we monitor that very, very closely. And as it is today and as we look at the forecast, we think it will be about the same, maybe up slightly from 2018, but you continue to monitor that.
Now, the math of the increased pilots coming in relative to same attrition, not as much growth on paper as what we had in 2018, does mean that we have a lot of opportunities in a more flexible basis, with a flexible fleet to have good conversations with our partners, which we always do. And it seems to me, and I think we mentioned this last quarter, we do anticipate higher volume of smaller deals real-time with our customers as they have needs that arise on a very aggressive basis and that's what our approach is going to be in 2019 and monitor all things with our pilots all the time and make sure we don't have too many, but definitely make sure we have enough to respond to the needs of our partners.
Steve O'Hara -- Sidoti & Company -- Analyst
Okay. And maybe one quick one, are there more opportunities along that line, because of the leverage lease buyout and did the -- I think the change in the lease accounting affects you guys this year. Did that have any net negative or positive impact?
No, we'll adopt a new leasing standard next quarter, but I think as I mentioned earlier, Steve that we had a couple of pockets of opportunity with some of these leverage lease structures that have been in place for many, many years and one of them we got done, the other pocket of opportunity is sort of potentially of similar size, but again I don't know that that's something we're going to get done in 2019. But we'd like to try to get it done in the next couple of years as we start to get closer to the expiration of that contract.
Steve O'Hara -- Sidoti & Company – Analyst
Okay, thank you very much for the time.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Chip Childs for any closing remarks.
Chip Childs -- Chief Executive Officer, President and Director
Thank you everyone again for showing interest in SkyWest. It's a pleasure to address some of the questions and elaborate more about what our strategy and our model is. Again, I want to thank the more than 14,000 professionals throughout our company and the great work that they do to give us the credibility to make sure we take care of our partners and our shareholders as well.
So, thank you for the interest and we'll meet back up next quarter.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Duration: 39 minutes
Call participants:
Robert J. Simmons -- Chief Financial Officer
Eric J. Woodward -- Chief Accounting Officer
Chip Childs -- Chief Executive Officer, President and Director
Wade Steel -- Chief Commercial Officer
Savi Syth -- Raymond James -- Analyst
Michael Linenberg -- Deutsche Bank -- Analyst
Duane Pfennigwerth -- Evercore ISI -- Analyst
Helane Becker -- Cowen and Company -- Analyst
Catherine O'Brien -- Goldman Sachs -- Analyst
Steve O'Hara -- Sidoti & Company -- Analyst
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