ST. GEORGE, Utah, Oct. 30, 2018 /PRNewswire/ -- SkyWest, Inc.
(NASDAQ: SKYW) ("SkyWest") today reported financial and operating
results for Q3 2018, including net income of $83 million, or $1.57 per diluted share, compared to net income
of $54 million, or $1.01 per diluted share for Q3 2017. Q3 2018
pre-tax income of $110 million
increased 27% from Q3 2017, primarily due to SkyWest's ongoing
fleet transition. Since Q3 2017, SkyWest added 34 new E175 aircraft
and one new CRJ900 aircraft, 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 labor 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."
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.
Operational Update
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 favor of a new
three-year pay agreement effective through October
2021. Separately, in October
2018 SkyWest Airlines pilots voted in favor 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.
Operating Performance
Flight completion rates at SkyWest Airlines and ExpressJet for
Q3 2018 and Q3 2017 were as follows:
|
|
SkyWest
Airlines
|
|
ExpressJet
|
|
|
Q3 2018
|
Q3 2017
|
|
Q3 2018
|
Q3 2017
|
Adjusted Completion
*
|
|
99.9%
|
99.9%
|
|
99.8%
|
99.9%
|
Raw
Completion
|
|
98.9%
|
98.9%
|
|
97.2%
|
95.3%
|
|
* Adjusted Completion
excludes weather cancellations. Raw Completion includes weather
cancellations.
|
Capital and Liquidity
SkyWest had $705 million in cash
and marketable securities at September 30,
2018, up from $649 million at
June 30, 2018. During the third
quarter of 2018, SkyWest:
- Used $43 million toward the
purchase of 12 E175 aircraft
- Used $15 million to repurchase
stock under its $100 million share
repurchase program, of which $55
million remains authorized
- Used $30 million for other
capital investments, primarily related to aircraft parts and
maintenance assets
Total debt at September 30, 2018
was $3.1 billion, up $140 million from June 30,
2018, which included debt issued for 12 E175 aircraft
acquired during the quarter, partially offset by scheduled
principal payments.
About SkyWest
Based in St. George, Utah,
SkyWest, Inc. is the holding company for two scheduled passenger
airline operations and an aircraft leasing company with more than
17,000 employees. SkyWest's airline companies provide commercial
air service in cities throughout North
America with nearly 3,000 daily flights carrying
approximately 50 million passengers annually. SkyWest's airline
companies operate through partnerships with United Airlines, Delta
Air Lines, American Airlines and Alaska Airlines.
SkyWest will host its conference call to discuss third quarter
2018 results today, October 30, 2018,
at 2:30 p.m. Mountain Time. The
conference call number is 1-877-418-5293 for domestic callers,
1-866-605-3852 for Canada callers
and 1-412-717-9593 for other international callers. Please call up
to ten minutes in advance to ensure you are connected prior to the
start of the call. The conference call will also be available live
on the Internet at
https://www.webcaster4.com/Webcast/Page/1088/27694. This press
release and additional information regarding SkyWest, including
access information for the digital rebroadcast of the third quarter
2018 earnings call, participation at investor conferences, investor
presentations and monthly traffic statistic releases, can be
accessed at inc.skywest.com.
Forward-Looking Statements
In addition to historical information, this release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as
"forecasts," "expects," "intends," "believes," "anticipates,"
"estimates," "should," "likely" and similar expressions identify
forward-looking statements. Such statements include, but are not
limited to, statements about the continued demand for our product,
the wind-down of ExpressJet's flying agreements with Delta and
American, and the related removal from service and/or placement
into service of certain aircraft, the scheduled aircraft deliveries
for SkyWest Airlines in upcoming years, and the associated
improvement in fleet mix and positioning for current and future
market opportunities, as well as SkyWest's future financial and
operating results, plans, objectives, expectations, estimates,
intentions and outlook, and other statements that are not
historical facts. All forward-looking statements included in this
release are made as of the date hereof and are based on information
available to SkyWest as of such date. SkyWest assumes no obligation
to update any forward-looking statements for any reason. Readers
should note that many factors could affect the future operating and
financial results of SkyWest, SkyWest Airlines or ExpressJet, and
could cause actual results to vary materially from those expressed
in forward-looking statements set forth in this release. These
factors include, but are not limited to, the prospects of entering
into agreements with existing or other carriers to fly new
aircraft, ongoing negotiations between SkyWest, SkyWest Airlines
and ExpressJet and their major partners regarding their contractual
obligations, uncertainties regarding operation of new aircraft, the
ability to attract and retain qualified pilots, the impact of
regulatory issues such as pilot rest rules and qualification
requirements, and the ability to obtain aircraft financing.
Actual operational and financial results of SkyWest, SkyWest
Airlines and ExpressJet will likely also vary, and may vary
materially, from those anticipated, estimated, projected or
expected for a number of other reasons, including, in addition to
those identified above: the challenges and costs of integrating
operations and realizing anticipated synergies and other benefits
from the acquisition of ExpressJet; the challenges of competing
successfully in a highly competitive and rapidly changing industry;
developments associated with fluctuations in the economy and the
demand for air travel; the financial stability of SkyWest's major
partners and any potential impact of their financial condition on
the operations of SkyWest, SkyWest Airlines, or ExpressJet;
fluctuations in flight schedules, which are determined by the major
partners for whom SkyWest's operating airlines conduct flight
operations; variations in market and economic conditions;
significant aircraft lease and debt commitments; residual aircraft
values and related impairment charges; labor relations and costs;
the impact of global instability; rapidly fluctuating fuel costs,
and potential fuel shortages; the impact of weather-related or
other natural disasters on air travel and airline costs; aircraft
deliveries; the ability to attract and retain qualified pilots and
other unanticipated factors. Risk factors, cautionary statements
and other conditions which could cause SkyWest's actual results to
differ materially from management's current expectations are
contained in SkyWest's filings with the Securities and Exchange
Commission, including its most recent Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q.
SkyWest, Inc. and
Subsidiaries
|
Condensed
Consolidated Statements of Income
|
(Dollars and Shares
in Thousands, Except per Share Amounts)
|
(Unaudited)
|
|
|
Three Months
Ended September
30
|
|
Nine Months
Ended September
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
Ended September
30,
|
|
Nine Months
Ended September
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)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly Fleet and
Block Hour Production Forecast for 2018
|
|
|
As of
12/31/2017
|
|
As of
3/31/2018
|
|
As of
6/30/2018
|
|
As of
9/30/2018
|
|
As of
12/31/2018
|
|
|
Fleet (1):
|
(Actual)
|
|
(Actual)
|
|
(Actual)
|
|
(Actual)
|
|
(Estimate)
|
|
|
E175s
|
107
|
|
112
|
|
126
|
|
138
|
|
146
|
|
|
CRJ700/900s
|
181
|
|
169
|
|
159
|
|
151
|
|
142
|
|
|
CRJ200s
|
195
|
|
199
|
|
198
|
|
185
|
|
187
|
|
|
ERJ145s/135s
|
112
|
|
100
|
|
100
|
|
100
|
|
100
|
|
|
Totals
|
595
|
|
580
|
|
583
|
|
574
|
|
575
|
|
|
|
|
Q4-2017
|
|
Q1-2018
|
|
Q2-2018
|
|
Q3-2018
|
|
Q4-2018
|
|
Total 2018
|
Production
(2):
|
(Actual)
|
|
(Actual)
|
|
(Actual)
|
|
(Actual)
|
|
(Estimate)
|
|
(Estimate)
|
Block Hours
|
450,095
|
|
436,367
|
|
439,174
|
|
448,025
|
|
431,000
|
|
1,755,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Fleet
count excludes aircraft removed from scheduled service. Actual
fleet counts may vary from the forecast due to timing of aircraft
removed from service, timing of aircraft transitioned into service
and timing of new aircraft deliveries.
|
|
(2) Actual
production may vary from estimates for various reasons including,
but not limited to, timing of aircraft removals and deliveries and
anticipated flight completion rates. SkyWest has discontinued
providing ASM forecasts, as ASMs are not a meaningful metric in
SkyWest's capacity purchase agreements.
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/skywest-inc-announces-third-quarter-2018-profit-300740735.html
SOURCE SkyWest, Inc.