SkyWest sold flying by the flight, not the ticket

SkyWest, founded in 1972, operates regional flights not as a ticketed airline but under capacity purchase agreements: major airline partners generally pay it fixed rates for operating aircraft, based primarily on the number of completed flights, flight time and the number of aircraft flown.

The major's brand sells the seats and keeps the passenger revenue and risk; SkyWest is paid like a contractor for dependable departures.

Turn an airline into a flying services firm: the regional partner sells schedule reliability rather than transportation. Fixed-fee CPAs convert every variable hazard of the business — fuel, pricing, load factor — into the major's problem, leaving SkyWest an operations-excellence business measured in completed flights. Scale economies (fleet, crews, maintenance) are the product; brand and demand are someone else's.

Sold schedule reliability instead of transportation: fixed-fee contracts shifted fuel, pricing, and load factor to the major, leaving SkyWest to scale pure operations.

Fixed-fee CPAs transfer fuel, pricing, and load factor risk to the major partner.

Revenue tied to completed flights aligns incentives with schedule reliability.

Serving multiple majors spreads fleet utilization and reduces single-hub dependence.

If your business is squeezed between input costs and demand swings, re-contract as a fixed-fee service to those who own demand: margins narrow but variance nearly vanishes.

Built one of the largest regional airlines as a capacity provider to multiple majors simultaneously on fixed-fee contracts (SEC 10-K). The capacity purchase agreement became the industry-standard structure for regional aviation, replicated across every major's feeder network.