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)%
|
||||||
