Wednesday, 31 October 2018

SkyWest publishes its third quarter 2018 results

SkyWest reported its financial and operating results for the third quarter of the year earlier this week which showed the company made a net income of $83 million, compared to net income of $54 million last year. The airlines third quarter 2018 pre-tax income of $110 million increased 27% from the same period in 2017, primarily due to SkyWest's ongoing fleet transition. Over the last few months, SkyWest added 34 new Embraer E175 aircraft and one new CRJ900 jet and removed 65 older aircraft from its fleet.

Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said, "We are focused on remaining disciplined in delivering a product that meets the evolving needs of our customers. We expect the flying and labour agreements announced this quarter to contribute to our ongoing fleet transition and help position us well for current and future market opportunities. I am proud of the outstanding product our professionals consistently deliver to our customers."  



Flying contract extension
SkyWest Airlines announced today that it has agreed to a multi-year extension with United Airlines ("United") for 60 CRJ-200s currently under a capacity purchase agreement.  These 60 aircraft originally had various contract maturities over the next few years. 

Deliveries under previously announced agreements
SkyWest Airlines took delivery of 12 new E175 aircraft during Q3 2018 and is scheduled to take delivery of eight new E175 aircraft during Q4 2018. SkyWest Airlines expects to have 146 E175 aircraft in its fleet by the end of 2018.

SkyWest Airlines also took delivery of one CRJ900 aircraft during Q3 2018 under a previously announced agreement with Delta for 20 new CRJ900s. Under this agreement, Delta will finance the 20 aircraft and SkyWest Airlines will operate these aircraft for a nine-year term. SkyWest Airlines anticipates taking delivery of four CRJ900s in Q4 2018 and the remaining 15 CRJ900s between Q1 2019 and mid-2020 under this agreement. SkyWest expects to remove 20 CRJ700s from contracts with Delta as each of these 20 CRJ900s are placed into service.

CRJ700 aircraft in transition
During Q3 2018, SkyWest Airlines placed four used CRJ700s into service under a previously announced agreement for 20 aircraft with American Airlines ("American"). These CRJ700s will be sourced from within SkyWest's existing fleet through other contract expirations and all 20 aircraft are scheduled to be in service with American by early 2019.

ExpressJet continued the previously-announced wind down of its flying agreement with Delta during the quarter. At the end of Q3 2018, ExpressJet had 12 CRJ700s in service under its Delta agreement and expects its contract with Delta will terminate by the end of 2018. Also, at the end of Q3 2018, ExpressJet had 16 CRJ700 aircraft in service under its contract with American and expects its contract with American will terminate by early 2019.

ExpressJet is currently operating 12 CRJ700s that are expected to be removed from service and returned to lessors by mid-2019. SkyWest also anticipates it will remove 30 owned CRJ700s from flying contracts from early to mid-2019 and as previously announced is pursuing alternative opportunities to utilize these aircraft in 2019.

CRJ200 aircraft in transition
During Q3 2018, ExpressJet began the transition for 20 CRJ200 aircraft to be placed into service under a previously announced three-year agreement with United Airlines ("United"). The aircraft will be sourced from within SkyWest's existing fleet through other contract expirations. The first aircraft was placed into service in October 2018 and all 20 CRJ200 aircraft are scheduled to be placed into service with United by early 2019.

New pilot agreements
During Q3 2018, ExpressJet pilots voted in favour of a new three-year pay agreement effective through October 2021. Separately, in October 2018 SkyWest Airlines pilots voted in favour of a new four-year pay agreement effective through December 2022. The financial terms of these agreements were not disclosed, but each agreement provides additional compensation to the respective pilot groups, and will allow each operating entity to provide outstanding career opportunities for pilots. These multi-year contracts provide better visibility to pursue current and future market opportunities.

Financial Highlights
Revenue was $829 million in Q3 2018, up from $813 million in Q3 2017. The increase in revenue included the net impact of adding 34 new E175 aircraft and other economic improvements within SkyWest's fleet mix since Q3 2017, partially offset by the removal of aircraft from unprofitable or less-profitable contracts over the same period.

Operating expenses were $691 million in Q3 2018, down from $700 million in Q3 2017. The decrease in operating expenses was primarily due to the reduction in direct operating costs from 30 fewer net aircraft in service since Q3 2017.

The tax rate for Q3 2018 was 24.5% compared to 38% in Q3 2017. The lower tax rate in Q3 2018 was primarily due to the reduced federal rate under the new tax law enacted in Q4 2017. 



SkyWest, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Dollars and Shares in Thousands, Except per Share Amounts)
(Unaudited)


Three Months EndedSeptember 30

Nine Months EndedSeptember 30


2018

2017

2018

2017

OPERATING REVENUES








  Flying agreements
$     816,057

$     800,965

$    2,377,659

$    2,317,218

  Airport customer service and other
13,218

11,708

40,531

34,133

   Total operating revenues
829,275

812,673

2,418,190

2,351,351










OPERATING EXPENSES








  Salaries, wages and benefits
301,378

304,014

901,775

896,476

  Aircraft maintenance, materials and repairs      
142,285

148,787

423,665

433,467

  Depreciation and amortization
86,088

74,095

246,386

215,415

  Aircraft rentals
36,827

54,976

119,015

168,098

  Aircraft fuel
30,258

22,791

87,208

61,295

  Airport-related expenses
25,655

30,209

80,852

91,106

  Other operating expenses
68,859

65,432

206,511

190,235

   Total operating expenses
691,350

700,304

2,065,412

2,056,092

OPERATING INCOME
137,925

112,369

352,778

295,259

OTHER INCOME (EXPENSE)








  Interest income
2,283

1,408

5,692

3,398

  Interest expense
(31,440)

(27,101)

(86,485)

(78,713)

  Other income (loss), net
1,157

-

3,470

-

  Total other expense, net
(28,000)

(25,693)

(77,323)

(75,315)










INCOME BEFORE INCOME TAXES
109,925

86,676

275,455

219,944

PROVISION FOR INCOME TAXES
26,879

32,960

62,189

80,966

NET INCOME
$      83,046

$      53,716

$     213,266

$     138,978










BASIC EARNINGS PER SHARE
$        1.60

$       1.04

$        4.10

$        2.68

DILUTED EARNINGS PER SHARE
$        1.57

$       1.01

$        4.03

$        2.62










Weighted average common shares








  Basic
52,039

51,833

52,002

51,801

  Diluted
52,981

53,080

52,976

53,087


SkyWest, Inc. and Subsidiaries
Summary of Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)


September 30, 2018

December 31, 2017
Cash and marketable securities
$     704,803

$     685,295
Other current assets
347,269

309,838
Total current assets
1,052,072

995,133
Property and equipment, net
4,847,688

4,134,003
Deposit on aircraft
27,579

49,000
Other long-term assets
257,521

296,264
Total assets
$    6,184,860

$    5,474,400




Current portion, long-term debt
$     357,327

$     309,678
Other current liabilities
556,118

511,147
Total current liabilities
913,445

820,825




Long-term debt, net of current maturities
2,751,722

2,377,346
Other long-term liabilities
590,820

521,907
Stockholders' equity
1,928,873

1,754,322
Total liabilities and stockholders' equity
$    6,184,860

$   5,474,400

Unaudited Operating Highlights


Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,


2018
2017
 Change

2018
2017
 Change

Block hours
448,025
469,901
(4.7)%

1,323,566
1,389,684
(4.8)%

Departures
261,382
281,921
(7.3)%

756,070
826,109
(7.4)%










Passengers carried
12,812,370
13,475,674
(4.9)%

36,472,231
38,861,025
(6.1)%

Passenger load factor
82.2%
80.0%
 2.2 pts

80.5%
80.2%
 0.3 pts










Average passenger trip length
519
503
3.2%

522
511
2.2%


SkyWest, Inc. and Subsidiaries
Additional Operational Information (unaudited)

SkyWest's total fleet in service increased by nine aircraft during Q3 2018, as follows:

Aircraft in scheduled service at June 30, 2018:


583

Additions:




New E175 aircraft:
12



New CRJ900 aircraft:
1



    Total new aircraft added:


13

           Removals, net:




CRJ200 aircraft:
(13)



CRJ700 aircraft:
(9)



         Total net aircraft removed:


(22)

Aircraft in scheduled service at September 30, 2018:


574








SkyWest's total fleet in service decreased by 30 aircraft over the last twelve months, as follows:

Aircraft in scheduled service at September 30, 2017:


604

Additions:




New E175 aircraft:
34



New CRJ900 aircraft:
1



    Total new aircraft added:


35

               Removals, net:




CRJ900 aircraft:
(24)



CRJ700 aircraft:
(17)



ERJ145/135 aircraft:
(18)



CRJ200 aircraft:
(6)



Total net removals:


(65)

Aircraft in scheduled service at September 30, 2018:


574








SkyWest, Inc. and Subsidiaries
Additional Operational Information (continued and unaudited)


Completed Block Hours by Aircraft Type and by Airline



Three months ended September 30

Nine months ended September 30

By Aircraft Type:
2018

2017

Variance
%

2018

2017

Variance
%

E175s
120,694

99,069

21.8%

329,669

269,048

22.5%

CRJ700/900s
120,914

150,334

(19.6)%

372,659

432,760

(13.9)%

Dual-class aircraft
241,608

249,403

(3.1)%

702,328

701,808

0.1%














CRJ200s
137,858

136,898

0.7%

412,635

407,649

1.2%

ERJ145/135s
68,559

83,600

(18.0)%

208,603

280,227

(25.6)%

50-seat aircraft
206,417

220,498

(6.4)%

621,238

687,876

(9.7)%

Total Block Hours
448,025

469,901

(4.7)%

1,323,566

1,389,684

(4.8)%




























Three months ended September 30

Nine months ended September 30

By Airline:
2018

2017

Variance
%

2018

2017

Variance
%

SkyWest Airlines
355,264

326,608

8.8%

1,028,492

908,364

13.2%

ExpressJet
92,761

143,293

(35.3)%

295,074

481,320

(38.7)%

Total Block Hours
448,025

469,901

(4.7)%

1,323,566

1,389,684

(4.8)%















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