1
EXHIBIT 13.1

SUMMARY FINANCIAL AND OPERATING DATA

Year Ended March 31,1998
- - --------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------

Operating revenues (000) $ 297,098 $ 278,110 $ 245,520 $ 218,075 $ 182,908
Operating income (000) $ 33,958 $ 15,417 $ 5,710 $ 20,341 $ 24,680
Net income (000) $ 21,944 $ 10,111 $ 4,366 $ 13,701 $ 14,396

Net income per common share(1):
Basic $ 1.06 $ .50 $ .21 $ .62 $ .73
Diluted $ 1.04 $ .50 $ .21 $ .61 $ .72

Weighted average shares (000)(1):
Basic 20,799 20,170 20,568 22,224 19,766
Diluted 21,168 20,248 20,736 22,428 20,126

Total assets (000) $ 330,406 $ 232,898 $ 227,550 $ 188,182 $ 184,017
Current assets (000) $ 192,801 $ 90,295 $ 76,462 $ 71,642 $ 87,088
Current liabilities (000) $ 49,692 $ 45,022 $ 43,644 $ 25,603 $ 20,473
Long-term debt (000) $ 49,571 $ 47,337 $ 53,736 $ 29,553 $ 26,647
Stockholders' equity (000) $ 211,133 $ 124,552 $ 115,800 $ 117,684 $ 122,788
Return on average equity 14.8% 8.3% 3.7% 11.1% 17.4%

SKYWEST AIRLINES, INC. OPERATING DATA
Passengers carried 2,989,062 2,656,602 2,340,366 2,073,885 1,730,993
Revenue passenger miles (000) 745,386 717,322 617,136 488,901 345,414
Available seat miles (000) 1,463,975 1,413,170 1,254,334 976,095 727,059
Load factor 50.9% 50.8% 49.2% 50.1% 47.5%
Break-even load factor 45.0% 47.9% 48.4% 45.5% 41.2%
Yield per revenue passenger mile 34.8c 33.3c 33.2c 36.3c 43.9c
Revenue per available seat mile 18.1c 17.3c 16.9c 18.8c 21.6c
Cost per available seat mile 16.0c 16.3c 16.6c 17.1c 18.8c
Average passenger trip length 249 270 264 236 200
Number of aircraft at end of year 60 60 63 60 55

QUARTERLY FINANCIAL AND STOCK PRICE DATA

Fiscal Year 1998
----------------------------------------------------
First Second Third Fourth Year
------- ------- ------- ------- --------

Operating revenues (000) $72,115 $80,302 $73,266 $71,415 $297,098
Operating income (000) $ 6,703 $12,248 $ 7,752 $ 7,255 $ 33,958
Net income (000) $ 4,345 $ 7,510 $ 5,422 $ 4,667 $ 21,944
Net income per common share (1):
Basic $ .22 $ .37 $ .27 $ .21 $ 1.06
Diluted $ .22 $ .37 $ .26 $ .21 $ 1.04
Stock price data (1):
High $ 8.50 $ 10.32 $ 14.81 $ 21.06 $ 21.06
Low $ 6.00 $ 7.69 $ 10.13 $ 14.75 $ 6.00

Fiscal Year 1997
----------------------------------------------------
First Second Third Fourth Year
------- ------- ------- ------- --------

Operating revenues (000) $70,569 $75,819 $63,651 $68,071 $278,110
Operating income (loss) (000) $ 7,678 $ 7,999 $(1,736) $ 1,476 $ 15,417
Net income(loss) (000) $ 4,834 $ 4,990 $ (821) $ 1,108 $ 10,111
Net income (loss) per common share (1):
Basic $ .24 $ .25 $ (.04) $ .06 $ .50
Diluted $ .24 $ .25 $ (.04) $ .06 $ .50
Stock price data (1):
High $ 9.88 $ 9.13 $ 7.82 $ 7.19 $ 9.88
Low $ 6.63 $ 7.06 $ 6.32 $ 6.00 $ 6.00

(1) On May 5, 1998, the Company's Board of Directors declared a 100 percent
stock dividend (one share for each share outstanding) payable to stockholders of
record on May 20, 1998. The dividend was distributed on June 8, 1998. The
Company paid cash in lieu of issuing fractional shares. All common shares and
per share information in the accompanying consolidated financial statements have
been retro-actively adjusted to reflect this stock dividend.

As of April 30, 1998, there were 1,041 holders of common stock. Cash dividends
of $.10 and $.12 per share of outstanding common stock were paid in fiscal years
1998 and 1997, respectively.

3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company, through SkyWest Airlines Inc., operates a regional airline offering
scheduled passenger service with approximately 580 daily departures to 46 cities
in 12 western states and Canada. Total operating revenues and passengers carried
have grown consistently from fiscal 1994 through fiscal 1998, at compound annual
growth rates of approximately 13.0 percent and 15.0 percent, respectively. In
fiscal 1994, SkyWest generated approximately 727 million available seat miles
("ASMs") with its fleet of twenty-eight 19-seat Metroliners, twenty-three
30-seat Brasilias and four Canadair Regional Jets ("CRJs") at fiscal year end.
As a result of the introduction of the 50-seat CRJs beginning in fiscal 1994,
the expansion of the Brasilia fleet and the strategic transition out of the
Metroliner aircraft as of December 1996, SkyWest generated approximately 1.5
billion ASMs in fiscal 1998 with a fleet of 50 Brasilias and 10 CRJs at fiscal
year end. The transition out of the Metroliner aircraft enabled SkyWest to
upgrade its aircraft to an all cabin-class fleet of Brasilias and CRJs, which
offer increased passenger acceptance and capacity and higher operating
efficiencies. The transition resulted in one-time pre-tax fleet restructuring
and transition expenses of $6.2 million, or $.19 per share, in fiscal 1996.

In fiscal 1998, the Company generated net income of $21.9 million, compared to
$10.1 million in fiscal 1997 and $4.4 million in fiscal 1996. The improvement
since fiscal 1996 reflects, among other factors, the addition of United
Airlines, Inc. ("United") as a code-sharing partner and the completion of
SkyWest's transition to an all cabin-class fleet.

SkyWest has been a code-sharing partner with Delta Air Lines, Inc. ("Delta") and
Continental Airlines, Inc. ("Continental") since 1987 and 1995, respectively.
SkyWest recently expanded its code-sharing relationships to include United
effective October 1, 1997. SkyWest operates as the Delta Connection in Salt Lake
City and Los Angeles, as United Express in Los Angeles and as the Continental
Connection in selected California markets. On January 19, 1998, SkyWest executed
an addendum to the United Express Agreement, expanding SkyWest's operations to
serve as the United Express carrier in San Francisco which began June 1, 1998.
On February 9, 1998, SkyWest executed an amendment to the United Express
Agreement to provide service as United Express in United's Portland and
Seattle/Tacoma markets and in additional Los Angeles markets which began April
23, 1998. SkyWest believes that its success in attracting multiple code-sharing
relationships is attributable to its delivery of high quality customer service
with an all cabin-class fleet.

Multiple code-sharing relationships have enabled SkyWest to reduce reliance on
any single major airline code and to enhance and stabilize operating results
through a mix of SkyWest-controlled flying and United Express contract flying.
On flights operated by SkyWest, SkyWest controls scheduling, ticketing, pricing
and seat inventories and receives a prorated portion of passenger fares. On
United Express contract routes, United controls scheduling, ticketing, pricing
and seat inventories with SkyWest receiving from United negotiated minimum
payments per flight departure and incentives related to passenger volumes and
levels of customer service. As of March 31, 1998, 68 percent of the Company's
capacity was generated in the Delta and Continental codes and 32 percent in the
United code. As a result of SkyWest's Los Angeles, San Francisco and Pacific
Northwest expansion, management expects that the percentages of SkyWest capacity
in the United Express contract flying will increase.

The Company has continued to emphasize cost management and better utilization of
existing resources. During the period from fiscal 1994 through fiscal 1998, cost
per ASM decreased from 18.8 cents to 16.0 cents. This reduction was due
primarily to the introduction of the CRJs, which offer lower unit operating
costs on longer stage lengths. In addition, the transition to an all-Brasilia
turboprop fleet has resulted in fewer flight interruptions and lower maintenance
costs. Furthermore, increased employee productivity has enabled the Company to
grow with few additional employees, except for flight crews to operate the
larger Brasilia and CRJ aircraft.

RESULTS OF OPERATIONS

The following table sets forth information regarding the Company's operating
expense components. Airline operating expenses are expressed as a percentage of
total airline operating revenues. Nonairline expenses are expressed as a
percentage of total nonairline revenues. Total operating expenses and interest
are expressed as a percentage of total consolidated revenues.

Fiscal Year Ended March 31,
------------------------------------------------------------------------------
1998 1997 1996
------------------------------------------------------------------------------
Percent Cents Percent Cents Percent Cents
of per of per of per
Amount Revenue ASM Amount Revenue ASM Amount Revenue ASM
-------- ------- ---- -------- ------- ---- -------- ------- ----

Salaries, wages and employee
benefits . . . . . . . . . . . . . . . . . $ 67,591 25.5% 4.6c $ 60,759 24.8% 4.3c $ 56,005 26.5% 4.5c
Aircraft costs . . . . . . . . . . . . . . . 52,357 19.8 3.6 49,822 20.4 3.5 43,009 20.3 3.5
Maintenance . . . . . . . . . . . . . . . . 20,535 7.8 1.4 20,929 8.6 1.4 20,779 9.8 1.6
Fuel . . . . . . . . . . . . . . . . . . . . 28,510 10.8 2.0 30,713 12.6 2.2 23,084 10.9 1.8
Other . . . . . . . . . . . . . . . . . . . 62,701 23.7 4.3 66,323 27.0 4.7 56,794 26.9 4.5
Interest . . . . . . . . . . . . . . . . . . 2,066 .8 .1 2,431 1.0 .2 2,160 1.0 .2
Fleet restructuring and transition
expenses . . . . . . . . . . . . . . . . . -- -- -- -- -- -- 6,247 3.0 .5
-------- ---- ---- -------- ----- ---- -------- ---- ----
Total airline expenses . . . . . . . . . . . 233,760 88.4 16.0c 230,977 94.4 16.3c 208,078 98.4 16.6c
-------- ---- ==== -------- ----- ==== -------- ---- ====
Nonairline expenses . . . . . . . . . . . . 32,319 98.8 34,147 102.0 33,895 99.6
-------- ---- -------- ----- -------- ----
Total operating expenses and
interest . . . . . . . . . . . . . . . . . $266,079 89.6% $265,124 95.3% $241,973 98.6%
======== ==== ======== ===== ======== ====

FISCAL 1998 COMPARED TO FISCAL 1997

During fiscal 1998, the Company enplaned a record number of passengers, reported
record consolidated net income and experienced continued growth in revenue
passenger miles ("RPMs") and ASMs. In fiscal 1998, consolidated net income
increased 117.0 percent to $21.9 million, or $1.04 per diluted share, after
retroactively giving effect to a 100 percent stock dividend (one share for each
share outstanding) declared May 5, 1998, compared to $10.1 million, or $.50 per
diluted share in fiscal 1997. Consolidated operating revenues increased to a
record $297.1 million in fiscal 1998 compared to $278.1 in fiscal 1997.

Passenger revenues, which represented 87.3 percent of total operating revenues,
increased 8.4 percent to $259.3 million in fiscal 1998 compared to $239.2
million or 86.0 percent of total operating revenues in fiscal 1997. The increase
is due to a 4.5 percent increase in yield per RPM and a 3.9 percent increase in
RPMs. SkyWest entered into a new code-sharing relationship with United and began
operating as United Express in Los Angeles beginning October 1, 1997. This
operation has resulted in both increased RPMs and increased yield per RPM. The
4.5 percent increase in yield per RPM also resulted from an increase in the
Company's portion of prorated fares with Delta in certain markets. SkyWest has
also acquired a new state-of-the-art revenue management and control system which
utilizes historical booking data and trends to optimize revenue. The combination
of these factors resulted in an increase in revenue per ASM to 18.1 cents in
fiscal 1998 compared to 17.3 cents in fiscal 1997.

Management has continued its efforts to reduce airline operating costs per ASM
and as a percentage of airline operating revenues. Total airline operating
expenses and interest were 88.4 percent of total airline operating revenues in
fiscal 1998 compared to 94.4 percent in fiscal 1997. This percentage decrease is
due to an 8.1 percent increase in total airline operating revenues and only a
1.2 percent increase in total airline operating expenses. This improvement is
primarily the result of the increase in revenues from the new United contract
flying as well as the Company not incurring expenses such as traffic commissions
and certain traffic handling expenses related to contract flying. Airline
operating costs per ASM decreased to 16.0 cents in fiscal 1998 from 16.3 cents
in fiscal 1997.

Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 25.5 percent in fiscal 1998 from 24.8 percent in fiscal
1997. The increase is primarily the result of incentive payments to employees,
which are based on the Company's profitability. The average number of employees
was 1,915 for fiscal 1998 compared to 1,852 for fiscal 1997. The increase is due
to the addition of crewmembers required for the Company's expansion. Salaries,
wages and employee benefits per ASM increased to 4.6 cents in fiscal 1998 from
4.3 cents in fiscal 1997.

Aircraft costs, including aircraft rent and depreciation, decreased slightly as
a percentage of airline operating revenues to 19.8 percent in fiscal 1998 from
20.4 percent in fiscal 1997. The decrease is due to airline operating revenues
increasing at a faster rate than aircraft costs. Aircraft costs per ASM were
3.6 cents in fiscal 1998 compared to 3.5 cents in fiscal 1997.

Maintenance expense decreased slightly as a percentage of airline operating
revenues to 7.8 percent in fiscal 1998 from 8.6 percent in fiscal 1997. The
decrease is due to airline operating revenues increasing while maintenance
expenses decreased, in fiscal 1998, due to the utilization of newer Brasilia
aircraft. Maintenance cost per ASM was 1.4 cents in fiscal 1998 and 1997.

Fuel costs decreased as a percentage of airline operating revenues to 10.8
percent in fiscal 1998 from 12.6 percent in fiscal 1997. The decrease is due to
airline operating revenues increasing 8.1 percent while fuel costs decreased 7.2
percent in fiscal 1998 compared to fiscal 1997. The decrease in fuel costs was
due to a reduction in the average fuel price per gallon from 95 cents in fiscal
1997 to 81 cents in fiscal 1998. As a result, fuel costs per ASM decreased to
2.0 cents in fiscal 1998 from 2.2 cents in fiscal 1997.

Other expenses, which consist primarily of commissions, landing fees, station
rents, computer reservation systems and hull and liability insurance, decreased
as a percentage of airline operating revenues to 23.7 percent in fiscal 1998
compared to 27.0 percent in fiscal 1997. The decrease is primarily the result of
the Company not incurring commissions on United contract related passenger
revenues. Due to the decrease in other expenses, cost per ASM decreased to 4.3
cents in fiscal 1998 from 4.7 cents in fiscal 1997.

Nonairline revenues decreased 2.3 percent to $32.7 million in fiscal 1998
compared to $33.5 million in fiscal 1997. Nonairline revenues decreased due to
weather related flight cancellations and as a result of lowering average fares
in order to increase market share in the Scenic Airlines operations. Nonairline
expenses decreased 7.9 percent to $31.4 million in fiscal 1998 compared to $34.1
million in fiscal 1997. The decrease was primarily due to the implementation of
cost control measures and the restructuring of the financing of flight equipment
and facilities.

FISCAL 1997 COMPARED TO FISCAL 1996

Consolidated operating revenues increased 13.3 percent to $278.1 million in
fiscal 1997 compared to $245.5 million in fiscal 1996. The Company also
experienced continued growth in passenger enplanements, RPMs and ASMs during
fiscal 1997 compared to fiscal 1996. Consolidated net income increased to $10.1
million, or $.50 per diluted share in fiscal 1997 compared to $4.4 million, or
$.21 per diluted share, in fiscal 1996. The fiscal 1996 results included a
pretax fleet restructuring expense of $6.2 million, or $.19 per diluted share,
resulting from a fleet rationalization plan that required a restructuring of the
Company's turboprop fleet.

Passenger revenues, which represented 86.0 percent of total operating revenues,
increased 16.7 percent to $239.2 million in fiscal 1997 from $205.0 million in
fiscal 1996. The increase was primarily due to a 16.2 percent increase in RPMs,
while yield per RPM remained relatively constant at 33.3 cents in fiscal 1997
compared to 33.2 cents in fiscal 1996. The increase in RPMs was due to a 20.3
percent increase in ASMs generated by Canadair Regional Jets, which were used to
provide service to destinations such as San Francisco, California, Pasco,
Washington and Colorado Springs, Colorado. Additionally, the Company acquired 15
new Brasilia aircraft to replace the 18 remaining Metroliner aircraft as their
leases expired or were terminated as part of the fleet rationalization program.
These aircraft fleet additions and changes resulted in a 12.7 percent increase
in ASMs. The growth in RPMs exceeded the growth in ASMs and resulted in a
passenger load factor of 50.8 percent in fiscal 1997 compared to 49.2 percent in
fiscal 1996.

As a result of the increased passenger load factor and a .3 percent increase in
yield per RPM, revenue per ASM increased 2.4 percent to 17.3 cents in fiscal
1997 from 16.9 cents in fiscal 1996.

Total airline operating expenses and interest were 94.4 percent of total airline
operating revenues in fiscal 1997 compared to 98.4 percent in fiscal 1996.
Exclusive of the one-time charge related to the fleet restructuring and
transition from Metro to Brasilia aircraft recorded in fiscal 1996, total
operating expenses and interest, as a percentage of total airline operating
revenues, decreased to 94.4 percent from 95.4 percent in fiscal 1996. This
percentage decrease was due to a 16.7 percent growth rate in passenger revenues
compared to a 14.4 percent increase in operating expenses and interest. The 14.4
percent increase in operating expenses and interest was exclusive of the
one-time fleet restructuring and transition expense recorded in fiscal 1996.
Airline operating costs per ASM decreased to 16.3 cents in fiscal 1997 from 16.6
cents in fiscal 1996. Exclusive of the one-time fleet restructuring and
transition expense, airline operating costs per ASM would have been 16.1 cents
for fiscal 1996. The slight increase in cost per ASM in fiscal 1997 was
primarily due to increased fuel costs.

Salaries, wages and employee benefits decreased as a percentage of airline
operating revenues to 24.8 percent in fiscal 1997 from 26.5 percent in fiscal
1996. The decrease was primarily due to airline operating revenues increasing at
a faster rate than employee related expenses. The average number of employees
was 1,852 for 1997 compared to 1,753 for fiscal 1996. The increase was primarily
due to the addition of flight attendants to crew new Brasilia aircraft.
Salaries, wages and employee benefits per ASM decreased to 4.3 cents in fiscal
1997 from 4.5 cents in fiscal 1996.

Aircraft costs, including aircraft rent and depreciation, increased slightly as
a percentage of airline operating revenues to 20.4 percent in fiscal 1997 from
20.3 percent in fiscal 1996, as a result of the fleet transition to Brasilia
aircraft. Aircraft costs per ASM were 3.5 cents in fiscal 1997 and 1996.

Maintenance expense decreased slightly as a percentage of airline operating
revenues to 8.6 percent in fiscal 1997 from 9.8 percent in fiscal 1996.
Maintenance cost per ASM decreased to 1.4 cents in fiscal 1997 from 1.6 cents in
fiscal 1996 due to the efficiency of additional new Brasilia aircraft.

Fuel costs increased as a percentage of airline operating revenues to 12.6
percent in fiscal 1997 compared to 10.9 percent in fiscal 1996. The increase was
primarily due to an 18.8 percent increase in the average fuel price per gallon
to $.95 in fiscal 1997 from $.80 in fiscal 1996. As a result, fuel costs per ASM
increased to 2.2 cents in fiscal 1997 from 1.8 cents in fiscal 1996.

Other expenses, which consist primarily of commissions, landing fees, station
rents, computer reservation systems and hull and liability insurance, increased
as a percentage of airline operating revenues to 27.0 percent in fiscal 1997
compared to 26.9 percent in fiscal 1996. The increase was due primarily to rate
increases in customer reservation systems booking fees. In addition, the Company
has experienced rate increases in landing fees and general passenger handling
charges. Interest expense as a percentage of airline operating revenues was 1.0
percent in fiscal 1997 and 1996. This percentage was the same since no new debt
financings were entered into during fiscal 1997.

Nonairline revenues decreased 1.7 percent to $33.5 million in fiscal 1997
compared to $34.0 million in fiscal 1996. The decrease is due to decreased
passenger enplanements in fiscal 1997. Nonairline expenses increased 0.8 percent
to $34.1 million for fiscal 1997 compared to $33.9 million for fiscal 1996. The
slight increase was primarily due to increased fuel costs.

LIQUIDITY AND CAPITAL RESOURCES

The Company had working capital of $143.1 million and a current ratio of 3.9:1
at March 31, 1998 compared to working capital of $45.3 million and a current
ratio of 2.0:1 at March 31, 1997. The principal sources of funds during fiscal
1998 were $48.4 million generated from operations, $65.7 million from the sale
of common stock, $11.5 million from the issuance of long-term debt, $11.2
million of proceeds from the sale of property and equipment, $3.3 million of
proceeds from the sale of available-for-sale securities and $1.1 million of tax
benefit from exercise of common stock options. During fiscal 1998 the Company
invested $22.8 million in flight equipment and $7.0 million in buildings, ground
equipment and other assets. The Company also reduced long-term debt by $7.4
million and paid $2.0 million in cash dividends. These factors resulted in a
$102.0 million increase in cash and cash equivalents during fiscal 1998.

The Company's position in available-for-sale securities, consisting primarily of
bonds and commercial paper, decreased to $14.6 million at March 31, 1998
compared to $18.0 million at March 31, 1997.

During fiscal 1998, the Company entered into an agreement to purchase 20 new
Brasilia aircraft related spare parts inventory and support equipment. Two of
these aircraft were delivered prior to March 31, 1998. At March 31, 1998 the
Company had agreed to purchase 18 Brasilia aircraft and related spare parts and
support equipment at an aggregate cost of approximately $144.0 million,
including estimated cost escalations. The Company also has options to acquire 40
additional Brasilia aircraft at fixed prices (subject to cost escalation and
delivery schedules) exercisable through fiscal 2000 and options to acquire an
additional ten CRJs, exercisable at any time. In connection with SkyWest's
expansion in Los Angeles, San Francisco and the Pacific Northwest, SkyWest
expects to acquire an additional 14 used Brasilias for a total of 34 new and
used aircraft. The Company also anticipates that SkyWest will incur costs of
approximately $24.0 million associated with the acquisition of additional ground
and maintenance facilities, support equipment and spare parts inventory related
to its expansion.

The Company has significant long-term lease obligations primarily relating to
its aircraft fleet. These leases are classified as operating leases and
therefore are not reflected as liabilities in the Company's consolidated balance
sheets. At March 31, 1998, the Company leased 44 SkyWest aircraft and 8 Scenic
Airlines aircraft under leases with remaining terms of up to 14.0 years. Future
minimum lease payments due under all long-term operating leases were
approximately $441.5 million at March 31, 1998.

At March 31, 1998, the Company had outstanding long-term debt, including current
maturities, of approximately $57.8 million. The interest rates on $7.1 million
of the $57.8 million of long-term debt are floating based on one month and three
month LIBOR. Long-term debt of $47.4 million was incurred in connection with the
acquisition of Brasilia aircraft and is subject to subsidy payments through the
export support program of the Federative Republic of Brazil. The subsidy
payments reduced the stated interest rates on the $47.4 million of long-term
debt to an average effective rate of approximately 4.0 percent as of March 31,
1998. The debt is payable in either monthly, quarterly or semi-annual
installments through January 2, 2006. These subsidy payments are at risk to the
Company if the Federative Republic of Brazil does not meet its obligations under
the export support program. While the Company has no reason to believe, based on
information currently available, that the Company will not continue to receive
these subsidy payments from the Federative Republic of Brazil in the future,
there can be no assurance that such a default will not occur.

The Company expended approximately $11.3 million for non-aircraft capital
expenditures during the year ended March 31, 1998, consisting primarily of
aircraft engine overhauls, aircraft modifications to be made pursuant to
industry-wide FAA directives, buildings and ground equipment, and rental
vehicles.

The Company has available $5.0 million in an unsecured bank line of credit with
interest payable at the bank's base rate less one-quarter percent, which was
8.25 percent at March 31, 1998. The Company believes that in the absence of
unusual circumstances the working capital available to the Company will be
sufficient to meet its present requirements, including expansion, capital
expenditure, lease payment and debt service requirements for at least the next
12 months.

YEAR 2000 COMPLIANCE

The Company is currently modifying computer systems and application programs for
year 2000 compliance, with project completion scheduled for March 31, 1999. The
Company believes that the cost to modify its systems or applications will not
have a material effect on its financial position or results of operations. Any
expenditures will be funded through operating cash flows while any costs for new
software will be capitalized and amortized over the software's useful life.
Although the Company is working cooperatively with third parties with systems
upon which the Company must rely, the Company can not give any assurances that
the systems of other parties will be year 2000 compliant on a timely basis.
Systems operated by others which the Company would use and/or rely on would
include: Federal Aviation Administration Air Traffic Control, computer
reservation systems for travel agent sales as well as Delta and United
reservation, passenger check-in and ticketing systems. The Company's business,
financial condition and/or results of operations could be materially adversely
affected by the failure of its system and applications or those operated by
others.

SEASONALITY

As is common in the airline industry, the Company's operations are favorably
affected by increased travel, historically occurring in the summer months and
are unfavorably affected by decreased business travel during the months from
November through January and by inclement weather which occasionally results in
cancelled flights, principally during the winter months. However, the Company
does expect some mitigation of the historical seasonal trends due to an increase
in the portion of its operations in contract flying with United. Scenic's
business is also seasonal in nature. A large percentage of Scenic's passengers
are tourists visiting the Las Vegas and Grand Canyon areas during the summer
months.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS March 31,
-------------------------
1998 1997
--------- ---------

CURRENT ASSETS:
Cash and cash equivalents $ 139,772 $ 37,786
Available-for-sale securities 14,627 17,970
Receivables, less allowance for doubtful accounts
of $124 in 1998 and $104 in 1997 10,699 10,851
Inventories 11,200 9,987
Prepaid aircraft rents 12,145 8,612
Other current assets 4,358 5,089
--------- ---------
Total current assets 192,801 90,295
--------- ---------

PROPERTY AND EQUIPMENT, at cost:
Aircraft and rotable spares 185,712 171,239
Buildings and ground equipment 42,663 43,508
Rental vehicles 3,148 3,291
--------- ---------
231,523 218,038

Less - accumulated depreciation and amortization (98,053) (80,295)
--------- ---------
133,470 137,743

OTHER ASSETS 4,135 4,860
--------- ---------
$ 330,406 $ 232,898
========= =========

The accompanying notes are an integral part of these
consolidated balance sheets.

LIABILITIES AND STOCKHOLDERS' EQUITY

March 31,
-------------------------
1998 1997
--------- ---------

CURRENT LIABILITIES:
Current maturities of long-term debt $ 8,238 $ 6,399
Trade accounts payable 31,202 29,213
Accrued salaries, wages and benefits 7,317 6,095
Taxes other than income taxes 1,698 1,537
Air traffic liability 1,237 1,488
Fleet restructuring accrual -- 290
--------- ---------

Total current liabilities 49,692 45,022
--------- ---------

LONG-TERM DEBT, less current maturities 49,571 47,337
--------- ---------

DEFERRED INCOME TAXES PAYABLE 20,010 15,987
--------- ---------

COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)

STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized; none issued -- --
Common stock, no par value; 40,000,000 shares authorized;
26,959,110 and 23,249,622 shares issued, respectively 155,917 89,146
Retained earnings 75,501 55,691
Treasury stock, at cost, 2,949,200 shares (20,285) (20,285)
--------- ---------
Total stockholders' equity 211,133 124,552
--------- ---------
$ 330,406 $ 232,898
========= =========

CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

For the year ended March 31,
--------------------------------------------------
1998 1997 1996
------------ ------------ ------------

Operating revenues:
Passenger $ 259,314 $ 239,222 $ 205,034
Freight 3,810 4,174 4,291
Public service and other 1,278 1,243 2,159
Nonairline 32,696 33,471 34,036
------------ ------------ ------------

Total operating revenues 297,098 278,110 245,520
------------ ------------ ------------

Operating expenses:
Flying operations 103,636 101,689 85,117
Aircraft, traffic and passenger service 38,957 37,044 32,522
Maintenance 29,299 29,149 28,713
Promotion and sales 25,505 29,606 25,965
Depreciation and amortization 19,305 18,481 15,392
General and administrative 14,992 12,577 11,962
Fleet restructuring and transition -- -- 6,247
Nonairline 31,446 34,147 33,892
------------ ------------ ------------

Total operating expenses 263,140 262,693 239,810
------------ ------------ ------------

Operating income 33,958 15,417 5,710
------------ ------------ ------------

Other income (expense):
Interest expense (2,939) (2,431) (2,163)
Interest income 4,283 2,481 2,707
Gain on sales of property and equipment 374 1,113 556
------------ ------------ ------------

Total other income 1,718 1,163 1,100
------------ ------------ ------------

Income before provision for income taxes 35,676 16,580 6,810
Provision for income taxes 13,732 6,469 2,444
------------ ------------ ------------

Net income $ 21,944 $ 10,111 $ 4,366
============ ============ ============

Net income per common share:
Basic $ 1.06 $ .50 $ .21
Diluted $ 1.04 $ .50 $ .21
============ ============ ============

Weighted average number of common shares outstanding:
Basic 20,799,000 20,170,000 20,568,000
Diluted 21,168,000 20,248,000 20,736,000
============ ============ ============

The accompanying notes are an integral part of these consolidated statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Common Stock Treasury Stock Retained
Shares Amount Shares Amount Earnings
---------- -------- ---------- -------- --------

Balance at March 31, 1995 22,936,112 $ 87,658 (2,300,000) $(16,091) $ 46,117
Net income -- -- -- -- 4,366
Exercise of common stock options
(at prices ranging from $1.92 to
$2.75 per share) 55,000 114 -- -- --
Sale of common stock under
employee stock purchase plan 52,504 287 -- -- --
Tax benefit from exercise of common
stock options -- 41 -- -- --
Compensation expense related to grant
of stock options -- 83 -- -- --
Purchase of treasury stock -- -- (649,200) (4,194) --
Cash dividends ($.13 per share) -- -- -- -- (2,581)
---------- -------- ---------- -------- --------

Balance at March 31, 1996 23,043,616 88,183 (2,949,200) (20,285) 47,902
Net income -- -- -- -- 10,111
Exercise of common stock options
(at a price of $2.75 per share) 102,500 282 -- -- --
Sale of common stock under
employee stock purchase plan 103,506 588 -- -- --
Tax benefit from exercise of common
stock options -- 93 -- -- --
Cash dividends ($.12 per share) -- -- -- -- (2,322)
---------- -------- ---------- -------- --------

Balance at March 31, 1997 23,249,622 89,146 (2,949,200) (20,285) 55,691
Net income -- -- -- -- 21,944
Exercise of common stock options
(at prices ranging from $6.32 to
$16.63 per share) 383,420 3,465 -- -- --
Sale of common stock under
employee stock purchase plan 106,068 663 -- -- --
Sale of common stock, net of offering
Costs of $3,648 3,220,000 61,557 -- -- --
Tax benefit from exercise of common
stock options -- 1,086 -- -- --
Cash dividends ($.10 per share) -- -- -- -- (2,134)
---------- -------- ---------- -------- --------

Balance at March 31, 1998 26,959,110 $155,917 (2,949,200) $(20,285) $ 75,501
========== ======== ========== ======== ========

The accompanying notes are an integral part of these consolidated statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

For the year ended March 31,
1998 1997 1996
--------- -------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,944 $ 10,111 $ 4,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,305 18,481 15,392
Nonairline depreciation and amortization 4,848 3,585 2,742
Maintenance expense related to disposition of rotable spares 322 286 173
Gain on sales of property and equipment (374) (1,113) (556)
Increase (decrease) in allowance for doubtful accounts 20 (117) 6
Increase in deferred income taxes 4,023 1,617 1,336
Amortization of deferred credits -- (1,614) (1,497)
Compensation expense related to grant of stock options -- -- 83
Changes in operating assets and liabilities:
Decrease (increase) in receivables 132 2,159 (5,895)
Increase in inventories, net of dispositions (1,749) (1,064) (1,744)
Increase in other current assets (2,802) (2,681) (2,286)
Increase in trade accounts payable 1,896 4,965 9,951
(Decrease) increase in fleet restructuring accrual (290) (3,498) 3,788
Increase in other current liabilities 1,132 854 1,005
--------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 48,407 31,971 26,864
--------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale securities 3,343 1,127 2,212
Acquisition of property and equipment:
Aircraft and rotable spares (22,812) (11,979) (48,508)
Deposits on aircraft and rotable spares -- -- (3,053)
Buildings and ground equipment (4,572) (4,886) (10,281)
Rental vehicles (2,392) (2,850) (2,842)
Proceeds from sales of property and equipment 11,238 2,945 4,114
Decrease in deposits on aircraft and rotable spares -- 3,603 8,715
(Increase) decrease in other assets (29) 413 (447)
--------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (15,224) (11,627) (50,090)
--------- -------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 65,685 870 401
Purchase of treasury stock -- -- (4,194)
Tax benefit from exercise of common stock options 1,086 93 41
Payment of cash dividends (2,041) (1,814) (2,581)
Reduction of long-term debt (7,427) (6,236) (4,329)
Proceeds from issuance of long-term debt 11,500 -- 31,001
--------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 68,803 (7,087) 20,339
--------- -------- --------

Increase (decrease) in cash and cash equivalents 101,986 13,257 (2,887)
Cash and cash equivalents at beginning of year 37,786 24,529 27,416
--------- -------- --------

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 139,772 $ 37,786 $ 24,529
========= ======== ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 3,012 $ 2,399 $ 2,060
Income taxes 8,221 3,950 3,090

The accompanying notes are an integral part of these consolidated statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION -

The accompanying consolidated financial statements include the accounts of
SkyWest, Inc. (a Utah corporation) and its wholly owned subsidiaries, SkyWest
Airlines, Inc. ("SkyWest"), Scenic Airlines, Inc. ("Scenic") and National Parks
Transportation, Inc. ("NPT"), collectively (the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS -

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

AVAILABLE-FOR-SALE SECURITIES -

The Company's investments in debt and equity securities have been classified as
available-for-sale securities and are recorded at fair market value. Significant
unrealized holding gains and losses will be recorded as a separate component of
stockholders' equity.

INVENTORIES -

Inventories include expendable parts, fuel and supplies and are valued at
weighted average cost less an allowance for obsolescence. Expendable parts are
charged to expense as used.

PROPERTY AND EQUIPMENT -

Property and equipment are stated at cost and depreciated over their useful
lives to their estimated residual values using the straight-line method as
follows:

Aircraft and rotable spares 3 - 14 years
Buildings and ground equipment 3 - 39.5 years
Rental vehicles 4 years

MAINTENANCE -

The Company operates under an FAA approved continuous inspection and maintenance
program. The cost of maintenance is charged to expense when incurred. The
Company uses the deferred method of accounting for EMB-120 engine overhauls and
uses the accrual method of accounting for regional jet engine overhauls.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

PASSENGER AND FREIGHT REVENUES -

Passenger and freight revenues are recognized when service is provided.
Passenger tickets sold but not used and the liability to other airlines are
recorded as air traffic liability.

INCOME TAXES -

The Company recognizes a liability or asset for the deferred tax consequences of
all temporary differences between the tax bases of assets and liabilities and
their reported amounts in the consolidated financial statements that will result
in taxable or deductible amounts in future years when the reported amounts of
the assets and liabilities are recovered or settled. As of March 31, 1998 and
1997, the Company had recorded current deferred tax assets of $2,065,000 and
$2,046,000, respectively (which are included in other current assets), and
deferred tax liabilities of $20,010,000 and $15,987,000, respectively.

DEFERRED CREDITS -

In order to assist the Company in integrating new aircraft into its fleet,
certain manufacturers provided the Company with cash or credits for spare parts.
With respect to purchased aircraft, these amounts reduced the capitalized cost
of the aircraft. With respect to leased aircraft (operating leases), the Company
had deferred these amounts and amortized them over the terms of the related
aircraft leases as a reduction of rent expense. Amounts amortized during the
years ended March 31, 1997 and 1996 were $1,614,000 and $1,497,000,
respectively. As of March 31, 1997, the Company had no remaining deferred
credits to amortize.

NET INCOME PER COMMON SHARE -

Basic net income per common share ("Basic EPS") excludes dilution and is
computed by dividing net income by the weighted average number of common shares
outstanding during the fiscal year. Diluted net income per common share
("Diluted EPS") reflects the potential dilution that could occur if stock
options or other contracts to issue common stock were exercised or converted
into common stock. The computation of Diluted EPS does not assume exercise or
conversion of securities that would have an antidilutive effect on net income
per common share. Net income per common share amounts and share data have been
restated for all periods presented to reflect Basic and Diluted EPS and the
subsequent stock dividend described in Note 5.

Following is a reconciliation of the numerator and denominator of Basic EPS to
the numerator and denominator of Diluted EPS for all periods presented (in
thousands, except per share amounts):

Year ended March 31, 1998 1997 1996
- - ------------------------------------------------------------------------------

Numerator:
Net Income $21,944 $10,111 $ 4,366
======= ======= =======

Denominator:
Weighted Average Common Shares Outstanding 20,799 20,170 20,568
Effect of Options 369 78 168
------- ------- -------
21,168 20,148 20,736
======= ======= =======

Basic EPS $ 1.06 $ .50 $ .21
Diluted EPS $ 1.04 $ .50 $ .21
======= ======= =======

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

FAIR VALUE OF FINANCIAL INSTRUMENTS -

The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents, available-for-sale securities, receivables and accounts
payable approximate fair values because of the immediate or short-term maturity
of these financial instruments. The fair value of the Company's long-term debt
is estimated based on current rates offered to the Company for similar debt and
approximates $56,262,000 as of March 31, 1998, as compared to the carrying
amount of $57,809,000.

RECENT ACCOUNTING PRONOUNCEMENTS -

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130") and No. 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 130 establishes standards for the reporting and
display of comprehensive income and its components and SFAS 131 establishes new
standards for public companies to report information about their operating
segments, products and services, geographic areas and major customers. Both
statements are effective for financial statements issued for periods beginning
after December 15, 1997. Accordingly, the Company will adopt SFAS 130 and SFAS
131 in its fiscal 1999 consolidated financial statements. Management believes
the adoption of SFAS 130 and 131 will not have a material impact on the
consolidated financial statements.

RECLASSIFICATIONS

Certain reclassifications have been made to the fiscal 1997 and 1996
consolidated financial statements in order to conform to the current fiscal year
presentations.

(2) LONG-TERM DEBT

Long-term debt consists of the following:

As of March 31,
-------------------------
1998 1997
------- -------
(in thousands)

Note payable to bank, due in monthly installments
of $223,094 including interest at 7.4% through
September 2002, secured by aircraft $10,400 $ --
Note payable to bank, due in monthly installments
of $90,394 including interest at 6.95% through
December 2005, secured by aircraft 6,485 7,096
Note payable to bank, due in monthly installments
of $88,737 including interest at 6.7% through
January 2006, secured by aircraft 6,476 7,085
Note payable to bank, due in monthly installments
of $91,290 including interest at 7.37% through
October 2005, secured by aircraft 6,350 6,953
Note payable to bank, due in monthly installments
of $64,319 plus interest at 6.36% through
November 2000. Balloon payment of $3,937,000
due December 2000, secured by aircraft 6,046 6,818
Note payable to bank, due in quarterly installments of
$177,906 plus interest at 8.58% through March 2005,
secured by aircraft 4,981 5,693

(2) LONG-TERM DEBT (continued)

Note payable to bank, due in monthly installments of
$77,265 including interest at 7.33% through June 2003,
secured by aircraft 4,031 4,638
Note payable to bank, due in quarterly installments of
$167,246 plus interest based on three month LIBOR
(7.39% at March 31, 1998) through September 2003,
secured by aircraft 3,679 4,348
Note payable to bank, due in monthly installments of
$54,702 plus interest based on one month LIBOR
(7.44% at March 31, 1998) through June 2003,
secured by aircraft 3,446 4,103
Note payable to financing company, due in quarterly
installments of $155,000 plus interest at
7.64% through July 2003, secured by aircraft 3,483 4,030
Note payable to bank, due in semi-annual installments
of $270,186 plus interest at 8.5% through May 2002,
secured by aircraft 2,432 2,972

57,809 53,736
Less - current maturities (8,238) (6,399)
------- -------
$49,571 $47,337
======= =======

The aggregate amounts of principal maturities of long-term debt as of March 31,
1998, are as follows (in thousands):

Year ending March 31,
---------------------

1999 $ 8,238
2000 8,627
2001 9,048
2002 9,502
2003 8,562
Thereafter 13,832
-------
$57,809

The Company's long-term debt, excluding $10,400,000, was incurred in connection
with the acquisition of Brasilia aircraft and is supported by subsidy payments
through the export support program of the Federative Republic of Brazil. The
subsidy payments reduce the stated interest rates to an average effective rate
of approximately 4.0 percent at March 31, 1998. These subsidy payments are at
risk to the Company if the Federative Republic of Brazil does not meet its
obligations under the export support program. While the Company has no reason to
believe, based on information currently available, that the Company will not
continue to receive these subsidy payments from the Federative Republic of
Brazil in the future, there can be no assurance that such a default will not
occur.

As of March 31, 1998, the Company had available $5,000,000 in an unsecured bank
line of credit with interest payable at the bank's base rate less one-quarter
percent, which was 8.25 percent at March 31, 1998.

Certain of the Company's long-term debt arrangements contain limitations on,
among other things, sale or lease of assets and ratio of long-term debt to
tangible net worth. As of March 31, 1998, the Company was in compliance with all
the debt covenants.

(3) INCOME TAXES

The provision for income taxes includes the following components (in thousands):

Year ended March 31,
----------------------------------
1998 1997 1996
------- ------- -------

Current tax provision:
Federal $ 7,587 $ 3,315 $ 2,656
State 2,141 355 204
9,728 3,670 2,860
Deferred tax provision (benefit):
Federal 3,363 2,344 (348)
State 641 455 (68)
4,004 2,799 (416)
------- ------- -------
Provision for income taxes $13,732 $ 6,469 $ 2,444
======= ======= =======

The following is a reconciliation between the statutory Federal income tax rates
(at a blended rate of 34 percent on taxable income up to $10,000,000 and 35
percent for taxable income in excess of $10,000,000) and the effective rate
which is derived by dividing the provision for income taxes by income before
provision for income taxes (in thousands).

Year ended March 31,
-----------------------------
1998 1997 1996
------- ------ ------

Computed "expected" provision
for income taxes at the statutory rates $12,387 $5,703 $2,315
Increase (decrease) in income taxes resulting from:
State income taxes, net of Federal income tax benefit 1,391 711 292
Other, net (46) 55 (163)
------- ------ ------
Provision for income taxes $13,732 $6,469 $2,444
======= ====== ======

The significant components of the net deferred tax assets and liabilities are as
follows (in thousands):

As of March 31,
------------------------
Deferred tax assets: 1998 1997
-------- --------

Accrued benefits $ 1,038 $ 979
Engine overhaul accrual 2,216 1,909
AMT credit carryforward 216 3,939
Accrued expense reserves and other 1,465 1,256
-------- --------
Total deferred tax assets 4,935 8,083
-------- --------

Deferred tax liabilities:
Accelerated depreciation (22,285) (21,047)
Other (595) (977)
-------- --------
Total deferred tax liabilities (22,880) (22,024)
-------- --------

Net deferred tax liability $(17,945) $(13,941)
======== ========

(4) COMMITMENTS AND CONTINGENT LIABILITIES

Lease Obligations

The Company leases 44 SkyWest aircraft and 8 Scenic aircraft, as well as airport
facilities, office space, and various other property and equipment under
noncancelable operating leases which are generally on a long-term net rent basis
where the Company pays taxes, maintenance, insurance and certain other operating
expenses applicable to the leased property. Management expects that, in the
normal course of business, leases that expire will be renewed or replaced by
other leases. The following summarizes future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of March 31, 1998 (in thousands):

Year ending March 31,
---------------------

1999 $ 40,939
2000 39,658
2001 38,938
2002 38,279
2003 36,426
Thereafter 247,220
--------
$441,460
========

Total rental expense for noncancelable operating leases was approximately
$35,188,000, $35,058,000, and $31,369,000 for the years ended March 31, 1998,
1997 and 1996, respectively.

The above minimum rental payments do not include landing fees, which amounted to
approximately $6,505,000, $6,259,000, and $4,460,000 for the years ended March
31, 1998, 1997 and 1996, respectively.

PURCHASE COMMITMENTS AND OPTIONS

During fiscal 1998, the Company entered into an agreement to purchase 20 new
Brasilia aircraft, related spare parts inventory and support equipment. Two of
these aircraft were delivered prior to March 31, 1998. At March 31, 1998, the
Company had agreed to purchase 18 Brasilia aircraft and related spare parts and
support equipment at an aggregate cost of approximately $144.0 million,
including estimated cost escalations. The Company also has options to acquire 40
additional Brasilia aircraft at fixed prices (subject to cost escalation and
delivery schedules) exercisable through fiscal 2000 and options to acquire an
additional ten Canadair Regional Jets, exercisable at any time.

LEGAL MATTERS

The Company is the subject of certain legal actions, which it considers routine
to its business activities. As of March 31, 1998, management believes that any
potential liability to the Company under such actions will not materially effect
the accompanying consolidated financial statements.

STANDBY LETTERS OF CREDIT

As of March 31, 1998, the Company has outstanding letters of credit totaling
approximately $2,265,000 related to requirements of certain airports, port
authorities and workers compensation agreements.

CASH AND CASH EQUIVALENTS

As of March 31, 1998, the Company has demand deposits and money market accounts
totaling $360,000 with Wells Fargo Bank, $432,000 with Bank of America, $631,000
with Edward D. Jones, $2,357,000 with Citibank and $53,151,000 with Zions First
National Bank. These balances exceed the $100,000 limit for insurance by the
Federal Deposit Insurance Corporation.

(5) CAPITAL TRANSACTIONS

PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of preferred stock from time
to time in one or more series without stockholder approval. No shares of
preferred stock are presently outstanding. The Board of Directors is authorized,
without any further action by the stockholders of the Company, to (i) divide the
preferred stock into series; (ii) designate each such series; (iii) fix and
determine dividend rights; (iv) determine the price, terms and conditions on
which shares of preferred stock may be redeemed; (v) determine the amount
payable to holders of preferred stock in the event of voluntary or involuntary
liquidation; (vi) determine any sinking fund provisions; and (vii) establish any
conversion privileges.

STOCK OFFERING

On February 20, 1998, the Company completed a public offering of 1,610,000
shares of common stock which generated net proceeds of $61,557,000 after
deducting underwriting commissions and other expenses.

SUBSEQUENT STOCK DIVIDEND

On May 5, 1998, the Company's Board of Directors declared a 100 percent stock
dividend (one share for each share outstanding) payable to stockholders of
record on May 20, 1998. The dividend was distributed on June 8, 1998. The
Company paid cash in lieu of issuing fractional shares. All common shares and
per share information in the accompanying consolidated financial statements have
been retroactively adjusted to reflect this stock dividend.

SUBSEQUENT CASH DIVIDEND

On May 5, 1998, the Company's Board of Directors declared a regular quarterly
cash dividend of $.03 per share payable to stockholders of record on June 30,
1998, distributable July 15, 1998.

STOCK OPTIONS

The Company's Board of Directors and Stockholders have approved the SkyWest,
Inc. Amended and Combined Incentive and Non-statutory Stock Option Plan ("the
Option Plan"). The Option Plan provides for the issuance of a maximum of
3,000,000 shares of common stock to officers, directors and other key employees.
The Option Plan is administered by the Board of Directors who designate option
grants as either incentive or non-statutory. Incentive stock options are granted
at not less than 100 percent of the market value of the underlying common stock
on the date of grant. Non-statutory stock options are granted at a price as
determined by the Board of Directors.

Both types of options are exercisable for the period as defined by the Board of
Directors at the date granted; however, no stock option will be exercisable
before six months have elapsed from the date it is granted and no incentive
stock option shall be exercisable after ten years from the date of grant. The
following table summarizes the stock option activity for fiscal years 1996, 1997
and 1998.

Average
Number of Weighted
Options Price
--------- --------

Outstanding at March 31, 1995 907,498 $8.56
Granted 210,000 8.11
Exercised (55,000) 2.07
--------- ----
Outstanding at March 31, 1996 1,062,498 8.81
Granted 238,000 7.48
Exercised (102,500) 2.75
Canceled (65,648) 6.90
--------- -----
Outstanding at March 31, 1997 1,132,350 9.19

(5) CAPITAL TRANSACTIONS (continued)

Granted 346,000 6.65
Exercised (383,420) 9.04
Canceled (104,214) 9.33
--------- -----
Outstanding at March 31, 1998 990,716 $8.34
========= =====

As of March 31, 1998, there were 596,590 shares available for future grant of
stock options under the Option Plan.

The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock-based compensation plans, which
include the Option Plan and the Stock Purchase Plan (see Note 6). SFAS No. 123,
"Accounting for Stock-Based Compensation," requires pro forma information
regarding net income and net income per share as if the Company had accounted
for its stock options and employee stock purchases granted or sold subsequent to
April 1, 1996, under the fair value method of the statement. The fair value of
these stock options and employee stock purchases was estimated at the grant date
using the Black-Scholes option pring model with the following assumptions used
for grants in fiscal 1998, 1997 and 1996: a risk-free interest rate of 5.6
percent for fiscal 1998 and 6.5 percent for fiscal 1997 and 1996, a dividend
yield of .5 percent for fiscal 1998 and 1.5 percent for fiscal 1997 and 1996, a
volatility factor of the expected common stock price of .390 for fiscal 1998 and
.508 for fiscal 1997 and 1996 and a weighted average expected life of four years
for the stock options and six months for employee stock purchases for all the
years presented. For purposes of the pro forma disclosures, the estimated fair
value of the stock options and employee stock purchases is amortized over the
estimated life of the respective stock options and employee stock purchases.
Following are the pro forma disclosures and the related impact on net income and
net income per share (in thousands, except per share information):

Year Ended March 31,
----------------------------
1998 1997 1996
------- ------- ------

Net Income:
As Reported $21,944 $10,111 $4,366
Pro Forma 21,213 9,838 4,232
Net Income Per Common Share:
Diluted as reported $ 1.04 $ .50 $ .21
Diluted pro forma $ 1.00 $ .49 $ .20

Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to April 1, 1996, and due to the nature and timing of option
grants, the resulting pro forma compensation cost may not be indicative of
future years.

(6) RETIREMENT PLAN AND EMPLOYEE STOCK PURCHASE PLAN

RETIREMENT PLAN

The Company sponsors the SkyWest Airlines Employee's Retirement Plan (the
"Plan"). Employees who have completed one year of service and are 21 years of
age are eligible for participation in the Plan. Employees may elect to make
contributions to the Plan. The Company matches 100 percent of such contributions
up to 2 percent, 4 percent or 6 percent of the individual participant's
compensation, based upon length of service. Additionally, a discretionary
contribution may be made by the Company. The Company's combined contribution was
$2,729,000, $1,960,000 and $1,728,000 to the Plan for the years ended March 31,
1998, 1997 and 1996, respectively.

EMPLOYEE STOCK PURCHASE PLAN

On February 7, 1996, the Company's Board of Directors approved the SkyWest, Inc.
1996 Employee Stock Purchase Plan ("the Stock Purchase Plan"). All employees who
have completed 90 days of employment are eligible to participate, except
officers who are highly compensated employees under section 414 (q) of the
Internal Revenue Code. The Stock Purchase Plan enables employees to purchase
shares of the Company's common stock

(6) RETIREMENT PLAN AND EMPLOYEE STOCK PURCHASE PLAN (continued)

at a 15 percent discount, through payroll deductions. Employees can contribute
two to 15 percent of their base pay, not to exceed $21,250 each calendar year,
for the purchase of shares. For the fiscal year ended March 31, 1998, 106,068
shares had been purchased by employees at prices of $5.90 and $6.64. For the
fiscal year ended March 31, 1997, 103,506 shares had been purchased by employees
at prices of $5.47 and $5.90. For the fiscal year ended March 31, 1996, 52,504
shares had been purchased by employees at a price of $5.47 per share. In
addition, as of March 31, 1998, $244,000 had been withheld for the future
purchase of shares. Shares are purchased semi-annually at the lower of the
beginning or the end of the period price. Employees can terminate from the Stock
Purchase Plan at anytime upon written notice.

(7) SEGMENT INFORMATION

Nonairline operating revenues and expenses primarily represent the operations of
Scenic and NPT, both wholly-owned subsidiaries of SkyWest, Inc. Scenic provides
air tours and general aviation services to the scenic regions of Northern
Arizona, Southern Utah and Southern Nevada, commonly referred to as the "Grand
Circle". The primary aircraft used to accomplish scenic tours are 19 passenger
deHavilland Twin Otter VistaLiners. NPT provides car rental services through a
fleet of Avis vehicles located at six airports.

Information related to this segment of the Company's business is as follows (in
thousands):

For the Year Ended March 31,
------------------------------
1998 1997 1996
------ ----- ------

Operating revenues $32,696 $33,471 $34,036
Operating (loss) income 1,250 (676) 144
Depreciation and amortization 4,848 3,585 2,742
Capital expenditures 15,499 5,476 14,209

As of March 31,
--------------------
1998 1997
------- -------

Identifiable assets $28,635 $28,338

(8) RELATED-PARTY TRANSACTIONS

The Company and Delta Air Lines, Inc. ("Delta") operate under a joint marketing
and code-sharing agreement under which the Company uses the Delta two letter
designator code (DL) in displaying its schedules on certain flights in the
automated airline reservation systems used throughout the industry. During
fiscal 1997, the Company entered into a code-sharing agreement with Continental
Airlines, Inc. ("Continental"). The Company uses the Continental two letter
designator code (CO) in displaying schedules on certain flights in the automated
airline reservation systems used throughout the industry. During fiscal 1998,
the Company entered into a code-sharing agreement with United Airlines, Inc.
("United"). The Company uses the United two letter designator code (UA) in
displaying schedules on certain flights in the automated airline reservation
systems used throughout the industry.

As of March 31, 1998, Delta owned 3,107,798 shares of common stock which
represents approximately 13 percent of the outstanding common stock of the
Company. The Company leases various terminal facilities from Delta and Delta
provides certain services to the Company, including advertising, reservation and
ground handling services. Expenses paid to Delta under these agreements were
approximately $8,893,000, $11,218,000 and $9,181,000 during the years ended
March 31, 1998, 1997 and 1996, respectively. United provides services to the
Company consisting of passenger and ground handling-services. The Company paid
$742,000 to United for their services for the year ended March 31, 1998.

The Company had a net payable to Delta of $65,000 as of March 31, 1998 and a net
receivable from Delta of $780,000 as of March 31, 1997. The Company had net
receivables from Continental of $182,000 and $284,000 as of March 31, 1998 and
1997, respectively and a net receivable from United of $1,687,000 as of March
31, 1998.