SkyWest reports pre-tax income of $18 million and net income of $15 million during quarter two of 2023

U.S. airline SkyWest has released details of its financial and operating results for the second quarter of 2023, including net income of $15 million, or $0.35 per diluted share, compared to net income of $54 million, or $1.07 earnings per diluted share, for Q2 2022.

Chip Childs, Chief Executive Officer of SkyWest, said, “We are making steady headway towards reaching our strategic business objectives and remain optimistic as we continue experiencing strong demand for our products. I want to thank our team of professionals for delivering industry-leading performance throughout the second quarter.”

SkyWest Airlines has a fleet of approximately 500 aircraft connecting passengers to over 240 destinations throughout North America. SkyWest Airlines operates through partnerships with United Airlines, Delta Air Lines, American Airlines, and Alaska Airlines carrying more than 40 million passengers in 2022.

Under its previously announced share repurchase programs, SkyWest repurchased 3.3 million shares of common stock for $94 million during Q2 2023. In total, during the first half of 2023, SkyWest repurchased 8.4 million shares of common stock for $194 million, which represented 17% of SkyWest’s outstanding shares as of December 31, 2022. The current share repurchase program authorized by the SkyWest Board of Directors in May 2023 had $186 million of remaining availability as of June 30, 2023.

Financial Results

Revenue was $726 million in Q2 2023, down $73 million, or 9%, from $799 million in Q2 2022. SkyWest deferred recognizing $60 million of revenue during Q2 2023 compared to recognizing previously deferred revenue of $16 million during Q2 2022. The amount of revenue deferred during Q2 2023 was driven by modified terms relating to fixed monthly cash payments under SkyWest’s previously announced amended flying contracts. See the “Other Supplemental Cash Flow Information” section of this release for more information. The remaining reduction in revenue was attributed to a decrease in block hour production in Q2 2023 compared to Q2 2022.

Operating expenses were $694 million in Q2 2023, down $16 million, or 2%, from $710 million in Q2 2022, driven by decreases in operating costs as a result of lower Q2 2023 block hour production compared to Q2 2022, partially offset by increases in employee compensation, including higher pilot pay scales.

Capital and Liquidity

SkyWest had $862 million in cash and marketable securities at June 30, 2023, down from $936 million at March 31, 2023 and $1.0 billion at December 31, 2022.

Total debt at June 30, 2023 was $3.2 billion, down from $3.3 billion at March 31, 2023 and $3.4 billion at December 31, 2022. Capital expenditures during Q2 2023 were $31 million for spare engines and other fixed assets.

Status Update on Previously Announced Agreements

SkyWest anticipates adding two E175 aircraft in Q4 2023 and one E175 aircraft in 2024 under a flying contract with Delta Air Lines. SkyWest also anticipates adding one E175 aircraft in 2025 under a flying contract with Alaska Airlines. Timing of future deliveries is subject to change.

By the end of 2025, SkyWest is scheduled to operate a total of 239 E175 aircraft.

SkyWest, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Loss) (Dollars and Shares in Thousands, Except per Share Amounts) (Unaudited)
		Three months ended								Six months ended
		June 30,								June 30,
		2023				2022				2023				2022
OPERATING REVENUES:
Flying agreements		$	700,394			$	773,774			$	1,364,232			$	1,481,837
Lease, airport services and other			25,249				25,311				53,242				52,400
Total operating revenues			725,643				799,085				1,417,474				1,534,237
OPERATING EXPENSES:
Salaries, wages and benefits			322,441				288,562				657,642				588,620
Aircraft maintenance, materials and repairs			162,491				174,883				304,717				323,296
Depreciation and amortization			97,169				97,249				191,318				199,994
Aircraft fuel			18,279				31,820				39,243				56,910
Airport-related expenses			16,955				17,490				35,250				36,695
Aircraft rentals			2,428				16,024				21,956				32,020
Other operating expenses			74,020				84,455				140,192				156,052
Total operating expenses			693,783				710,483				1,390,318				1,393,587
OPERATING INCOME			31,860				88,602				27,156				140,650
OTHER INCOME (EXPENSE):
Interest income			10,494				2,559				20,527				2,984
Interest expense			(33,718	)			(30,433	)			(67,338	)			(59,025	)
Other income, net			9,001				12,019				11,175				12,899
Total other expense, net			(14,223	)			(15,855	)			(35,636	)			(43,142	)
INCOME (LOSS) BEFORE INCOME TAXES			17,637				72,747				(8,480	)			97,508
PROVISION (BENEFIT) FOR INCOME TAXES			2,218				18,796				(1,828	)			25,823
NET INCOME (LOSS)		$	15,419			$	53,951			$	(6,652	)		$	71,685
BASIC EARNINGS (LOSS) PER SHARE		$	0.35			$	1.07			$	(0.14	)		$	1.42
DILUTED EARNINGS (LOSS) PER SHARE		$	0.35			$	1.07			$	(0.14	)		$	1.42
Weighted average common shares:
Basic			43,837				50,522				46,614				50,501
Diluted			44,219				50,566				46,614				50,637

SkyWest, Inc. and Subsidiaries Summary of Consolidated Balance Sheets (Dollars in Thousands) (Unaudited)
	June 30,			December 31,
	2023			2022
Cash and marketable securities	$	862,349		$	1,047,215
Other current assets		320,784			324,066
Total current assets		1,183,133			1,371,281
Property and equipment, net		5,467,212			5,524,549
Deposits on aircraft		23,931			23,931
Other long-term assets		441,498			494,792
Total assets	$	7,115,774		$	7,414,553
Current portion, long-term debt	$	442,155		$	438,502
Other current liabilities		723,839			734,041
Total current liabilities		1,165,994			1,172,543
Long-term debt, net of current maturities		2,743,804			2,941,772
Other long-term liabilities		1,048,737			952,607
Stockholders' equity		2,157,239			2,347,631
Total liabilities and stockholders' equity	$	7,115,774		$	7,414,553

SkyWest, Inc. and Subsidiaries Additional Operational Information (unaudited)
SkyWest’s fleet in scheduled service or under contract by aircraft type:
		June 30, 2023		December 31, 2022		June 30, 2022
E175 aircraft		235		236		223
CRJ900 aircraft		41		41		44
CRJ700 aircraft		110		104		114
CRJ200 aircraft		106		136		140
Total aircraft in service or under contract		492		517		521

As of June 30, 2023, SkyWest leased 35 CRJ700s and five CRJ900s to third parties and had nine CRJ200s that are ready for service under SkyWest Charter operations (these aircraft are excluded from the table above).

Selected operational data:

		For the three months ended June 30,									For the six months ended June 30,
Block hours by aircraft type:		2023			2022			% Change			2023			2022			% Change
E175s		168,416			165,224			1.9	%		329,167			311,401			5.7	%
CRJ900s		19,698			27,479			(28.3	)%		40,411			53,334			(24.2	)%
CRJ700s		50,094			72,120			(30.5	)%		102,122			139,998			(27.1	)%
CRJ200s		44,409			69,930			(36.5	)%		87,159			141,013			(38.2	)%
Total block hours		282,617			334,753			(15.6	)%		558,859			645,746			(13.5	)%
Departures		173,837			199,678			(12.9	)%		334,460			375,889			(11.0	)%
Passengers carried		9,887,779			11,124,468			(11.1	)%		18,463,649			19,911,835			(7.3	)%
Adjusted flight completion		99.9	%		99.9	%		—	pts		99.9	%		99.4	%		0.5	pts
Raw flight completion		98.9	%		99.1	%		(0.2	) pts		98.2	%		97.7	%		0.5	pts
Passenger load factor		85.5	%		86.0	%		(0.5	) pts		83.0	%		82.1	%		0.9	pts
Average trip length		451			491			(8.1	)%		461			503			(8.3	)%

Adjusted flight completion percent excludes weather cancellations. Raw flight completion includes weather cancellations.

Supplemental Cash Flow Information

SkyWest receives certain fixed monthly cash payments under its capacity purchase agreements (“CPAs”) that are attributed to SkyWest’s overhead costs and certain fixed monthly cash payments associated with SkyWest’s aircraft ownership costs. Fixed payments allocated to the non-lease portion are recognized as revenue on a completed block hour basis over the applicable contract term. Fixed payments allocated to the lease portion are accounted for as lease revenue under the CPAs and are recognized on a straight-line basis over the applicable contract term. Fixed monthly cash payments received in excess of revenue recognized during the reporting period are recorded as deferred revenue and revenue recognized in excess of fixed monthly cash payments during the reporting period are recorded as unbilled revenue on SkyWest’s consolidated balance sheet. Recent amendments to certain CPAs modified the fixed rate structure and resulted in higher deferred revenue amounts in 2023 compared to 2022. The following supplemental cash flow schedule summarizes the total revenue recognized in excess of (or less than) the fixed monthly cash received during the indicated reporting periods and the cumulative difference as of June 30, 2023 and December 31, 2022 (dollars in thousands, unaudited).

		Three months ended							Six months ended
		June 30,							June 30,
		2023				2022			2023				2022
Revenue recognized in excess of (less than) fixed cash payments received		$	(60,203	)		$	15,742		$	(123,398	)		$	26,880

		As of June 30, 2023				As of December 31, 2022
Cumulative revenue recognized less than fixed cash payments received