ST. GEORGE, Utah, Jan. 31, 2019 /PRNewswire/ -- SkyWest, Inc.
(NASDAQ: SKYW) ("SkyWest") today reported financial and operating
results for Q4 2018, including net income of $67 million, or $1.28 per diluted share, compared to net income
of $290 million, or $5.46 per diluted share for Q4 2017. Adjusted net
income in Q4 2017 was $43 million, or
$0.81 per diluted share, excluding a
special income tax benefit from the tax law change in
20171. There was no comparable adjustment in 2018.
Pre-tax income of $91 million
increased 33% from Q4 2017, primarily due to SkyWest's ongoing
fleet transition. Since Q4 2017, SkyWest added 39 new E175 aircraft
and five new CRJ900 aircraft, while removing 48 older aircraft from
its fleet.
SkyWest reported net income of $280
million, or $5.30 per diluted
share for the 2018 year, compared to net income of $429 million, or $8.08 per diluted share for the 2017 year.
Adjusted net income for the 2017 year was $182 million, or $3.43, excluding a special income tax benefit
from the tax law change in 20172.
Commenting on the results, Chip
Childs, Chief Executive Officer and President of SkyWest,
said, "The fourth quarter completed a strong 2018 for SkyWest, with
our people continuing to produce an exceptional product for each of
our mainline partners and customers. We look forward to moving
ahead as one airline in 2019 as we continue to reduce risk,
increase flexibility and ensure we're best positioned for continued
opportunities."
Financial Highlights
Revenue was $803 million in Q4 2018, up from $771 million in Q4 2017. The increase in revenue
included the impact of adding 39 new E175 aircraft, and other
economic improvements within SkyWest's fleet mix since Q4 2017,
partially offset by the removal of aircraft from less-profitable
contracts over the same period.
Operating expenses were $682
million in Q4 2018, up slightly from $678 million in Q4 2017. The increase in
operating expenses was due to higher fuel costs and increased labor
costs.
Operational Update
New flying agreement
SkyWest announced today it has secured a new flying contract with
Delta to acquire nine new E175s and operate the aircraft for a
nine-year term. SkyWest is scheduled to take delivery of five new
E175 aircraft during the first half of 2019 and four new E175
aircraft in 2020. SkyWest anticipates removing nine used CRJ900
aircraft from its Delta contract as these nine E175 aircraft are
placed into service. Following the removal of service with Delta,
SkyWest anticipates returning four CRJ900s to the lessor, and
SkyWest has an agreement to lease five CRJ900s to a third party
under a six-year term.
Flying contract extension
SkyWest also announced today that it has agreed to a multi-year
extension with Delta on 15 CRJ900 aircraft, 14 CRJ200 aircraft and
three CRJ700 aircraft. These 32 aircraft had various contract
maturities previously scheduled in 2019 and 2020. The economics
associated with these extensions became effective January 1, 2019. Additionally, Delta extended the
term on the first 19 E175s under contract with SkyWest from nine
years to eleven years.
Deliveries under previously announced agreements
SkyWest took delivery of eight new E175 aircraft during Q4 2018
under a previously announced agreement with Delta. SkyWest also
anticipates taking delivery of three new E175 aircraft in 2021
under a previously announced agreement with Alaska Airlines.
SkyWest took delivery of four CRJ900s during Q4 2018, for a
total of five CRJ900s during 2018, under a previously announced
agreement with Delta for 20 new CRJ900s. Delta will finance the 20
CRJ900 aircraft and SkyWest will operate these aircraft for a
nine-year term. SkyWest anticipates taking delivery of the
remaining 15 CRJ900s under this agreement between Q1 2019 and
mid-2020. SkyWest expects to individually remove 20 CRJ700s from
contracts with Delta as each of these new 20 CRJ900s are placed
into service. As previously announced, SkyWest has an agreement
with American Airlines to place 20 CRJ700s into service by early
2019.
January 2019 Updates
In January 2019, SkyWest completed
the previously announced sale of ExpressJet to ManaAir, LLC. The
transaction was completed in two parts, through an asset sale and
stock sale, for a total of $76
million. As part of the transaction, SkyWest retained
ownership of 30 CRJ700 aircraft that were previously operated by
ExpressJet. The majority of these 30 CRJ700 aircraft are currently
being utilized under existing SkyWest agreements. SkyWest has also
agreed to lease 16 CRJ200s to ExpressJet for up to five years.
Also, in January 2019, SkyWest
reached an agreement with a lessor on an early leveraged lease
buyout on 16 CRJ700s and 36 CRJ200s. SkyWest estimates it will use
$110 million in cash during Q1 2019
to acquire these aircraft. SkyWest anticipates that owning these
aircraft will provide additional fleet flexibility, reduce tail
risk and avoid future lease return costs along with being
immediately accretive to earnings.
Operating Performance:
Flight completion rates at SkyWest Airlines and ExpressJet for Q4
2018 and Q4 2017 were as follows:
|
|
SkyWest
Airlines
|
|
ExpressJet
|
|
|
Q4 2018
|
|
Q4 2017
|
|
Q4 2018
|
|
Q4 2017
|
Adjusted Completion
*
|
|
99.9%
|
|
99.9%
|
|
98.8%
|
|
99.9%
|
Raw
Completion
|
|
99.0%
|
|
98.8%
|
|
96.9%
|
|
98.9%
|
|
|
|
* Adjusted Completion
excludes weather cancellations. Raw Completion includes weather
cancellations.
|
Capital and Liquidity
SkyWest had $689 million in cash
and marketable securities at December 31,
2018, down from $705 million
at September 30, 2018. During the
fourth quarter of 2018, SkyWest:
- Used $28 million toward the
purchase of eight E175 aircraft
- Used $29 million to repurchase
stock under its $100 million share
repurchase program, of which $26
million remains authorized
- Used $39 million for other
capital investments, primarily related to spare engines, aircraft
parts and maintenance assets
Total debt at December 31, 2018
was $3.2 billion, up $51 million from September
30, 2018, which included debt issued for eight E175 aircraft
acquired during the quarter, partially offset by scheduled
principal payments.
Reconciliation to
Adjusted Net Income and Diluted Earnings per Share
(unaudited)
|
(Dollars in
thousands, except per diluted share)
|
|
|
|
|
|
|
|
|
|
|
|
For the three
months ended December 31, 2017
|
|
|
Pre-tax
income
|
|
Income tax
benefit (expense)
|
|
Net
income
|
|
Net income per
Diluted Share
|
GAAP
income
|
|
$
68,238
|
|
$ 221,690
|
|
$
289,928
|
|
$ 5.46
|
Q4 2017 adjustments
(1)
|
|
-
|
|
(246,845)
|
|
(246,845)
|
|
|
Adjusted
income
|
|
$
68,238
|
|
$ (25,155)
|
|
$
43,083
|
|
$ 0.81
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2017
|
|
|
Pre-tax
income
|
|
Income tax
benefit (expense)
|
|
Net
income
|
|
Net income per
Diluted Share
|
GAAP
income
|
|
$
288,183
|
|
$ 140,724
|
|
$
428,907
|
|
$ 8.08
|
2017 year adjustments
(1)
|
|
-
|
|
(246,845)
|
|
(246,845)
|
|
|
Adjusted
income
|
|
$
288,183
|
|
$
(106,121)
|
|
$
182,062
|
|
$ 3.43
|
|
These adjustments
allow investors to better understand and analyze our recurring core
performance in the periods presented.
|
(1)
|
Adjusts for tax
benefit resulting from the Tax Cuts and Jobs Act enacted during Q4
2017 that resulted in a revaluation of SkyWest's deferred tax
assets and liabilities.
|
About SkyWest
SkyWest, Inc. is the holding company for SkyWest Airlines and
SkyWest Leasing, an aircraft leasing company. SkyWest Airlines has
a fleet of nearly 500 aircraft connecting millions of passengers
each month to over 250 destinations and provides commercial air
service in cities throughout North
America with more than 2,100 daily flights. SkyWest Airlines
operates through partnerships with United Airlines, Delta Air
Lines, American Airlines and Alaska Airlines to carry more than 35
million passengers annually. Based in St.
George, Utah, SkyWest continues to set the standard for
excellence across the regional industry with exceptional value for
customers, shareholders and its nearly 14,000 employees.
SkyWest will host its conference call to discuss fourth quarter
2018 results today, January 31, 2019,
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/1088/28949. This press
release and additional information regarding SkyWest, including
access information for the digital rebroadcast of the fourth
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 potential benefits resulting from the sale of ExpressJet,
including reduced risk, increased flexibility and improved
positioning for market opportunities, the scheduled aircraft
deliveries for SkyWest Airlines in upcoming years, and related
removal from service and/or placement into service of certain
aircraft, the potential benefits resulting from the early lease
buyout of certain aircraft, including increased fleet flexibility,
reduced tail risk, avoidance of lease return costs and accretion to
earnings, 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 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 and its 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 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 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; fluctuations in flight
schedules, which are determined by the major partners for whom
SkyWest conducts 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
December
31
|
|
Twelve Months
Ended
December
31
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
OPERATING
REVENUES
|
|
|
|
|
|
|
|
Flying
agreements
|
$
791,862
|
|
$
761,079
|
|
$
3,169,520
|
|
$
3,078,297
|
Airport
customer service and other
|
11,628
|
|
10,162
|
|
52,159
|
|
44,295
|
Total
operating revenues
|
803,490
|
|
771,241
|
|
3,221,679
|
|
3,122,592
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
Salaries, wages
and benefits
|
299,744
|
|
295,591
|
|
1,201,518
|
|
1,192,067
|
Aircraft
maintenance, materials and repairs
|
132,594
|
|
145,996
|
|
556,259
|
|
579,463
|
Depreciation
and amortization
|
88,203
|
|
77,353
|
|
334,589
|
|
292,768
|
Aircraft
rentals
|
35,929
|
|
47,709
|
|
154,945
|
|
215,807
|
Aircraft
fuel
|
30,449
|
|
23,841
|
|
117,657
|
|
85,136
|
Airport-related
expenses
|
28,753
|
|
27,268
|
|
109,605
|
|
118,374
|
Other operating
expenses
|
66,315
|
|
60,544
|
|
272,826
|
|
250,778
|
Total
operating expenses
|
681,987
|
|
678,302
|
|
2,747,399
|
|
2,734,393
|
OPERATING
INCOME
|
121,503
|
|
92,939
|
|
474,280
|
|
388,199
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
Interest
income
|
3,131
|
|
1,111
|
|
8,823
|
|
4,509
|
Interest
expense
|
(33,924)
|
|
(26,212)
|
|
(120,409)
|
|
(104,925)
|
Other income
(loss), net
|
150
|
|
400
|
|
3,620
|
|
400
|
Total other
expense, net
|
(30,643)
|
|
(24,701)
|
|
(107,966)
|
|
(100,016)
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME
TAXES
|
90,860
|
|
68,238
|
|
366,314
|
|
288,183
|
PROVISION (BENEFIT)
FOR INCOME TAXES
|
23,754
|
|
(221,690)
|
|
85,942
|
|
(140,724)
|
NET INCOME
|
$
67,106
|
|
$
289,928
|
|
$
280,372
|
|
$
428,907
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER
SHARE
|
$
1.30
|
|
$
5.60
|
|
$
5.40
|
|
$
8.28
|
DILUTED EARNINGS PER
SHARE
|
$
1.28
|
|
$
5.46
|
|
$
5.30
|
|
$
8.08
|
|
|
|
|
|
|
|
|
Weighted average
common shares
|
|
|
|
|
|
|
|
Basic
|
51,650
|
|
51,811
|
|
51,914
|
|
51,804
|
Diluted
|
52,556
|
|
53,140
|
|
52,871
|
|
53,100
|
SkyWest, Inc. and
Subsidiaries
|
Summary of
Consolidated Balance Sheets
|
(Dollars in
Thousands)
|
(Unaudited)
|
|
|
December
31,
2018
|
|
December
31,
2017
|
Cash and marketable
securities
|
$
689,329
|
|
$
685,295
|
Other current
assets
|
331,465
|
|
309,838
|
Total current
assets
|
1,020,794
|
|
995,133
|
Property and
equipment, net
|
4,963,732
|
|
4,134,003
|
Deposit on
aircraft
|
42,012
|
|
49,000
|
Other long-term
assets
|
286,674
|
|
296,264
|
Total
assets
|
$
6,313,212
|
|
$
5,474,400
|
|
|
|
|
Current portion,
long-term debt
|
$
350,206
|
|
$
309,678
|
Other current
liabilities
|
574,620
|
|
511,147
|
Total current
liabilities
|
924,826
|
|
820,825
|
|
|
|
|
Long-term debt, net
of current maturities
|
2,809,768
|
|
2,377,346
|
Other long-term
liabilities
|
614,337
|
|
521,907
|
Stockholders'
equity
|
1,964,281
|
|
1,754,322
|
Total liabilities and
stockholders' equity
|
$
6,313,212
|
|
$
5,474,400
|
Unaudited
Operating Highlights
|
|
|
Three Months
Ended
December
31,
|
|
Twelve Months
Ended
December
31,
|
|
2018
|
2017
|
Change
|
|
2018
|
2017
|
Change
|
Block
hours
|
433,481
|
450,095
|
(3.7)%
|
|
1,757,047
|
1,839,779
|
(4.5)%
|
Departures
|
244,983
|
260,943
|
(6.1)%
|
|
1,010,053
|
1,087,052
|
(7.1)%
|
|
|
|
|
|
|
|
|
Passengers
carried
|
11,878,239
|
12,622,527
|
(5.9)%
|
|
48,350,470
|
51,483,552
|
(6.1)%
|
Passenger load
factor
|
80.4%
|
81.8%
|
(1.4) pts
|
|
80.5%
|
80.4%
|
0.1
pts
|
|
|
|
|
|
|
|
|
Average passenger
trip length
|
526
|
520
|
1.2%
|
|
523
|
512
|
2.1%
|
SkyWest, Inc. and
Subsidiaries
|
Additional
Operational Information (unaudited)
|
|
|
SkyWest's total fleet
in service increased by 22 aircraft during Q4 2018, as
follows:
|
|
|
|
Aircraft in
scheduled service at September 30, 2018:
|
|
|
574
|
|
|
Additions:
|
|
|
|
|
|
New E175
aircraft:
|
8
|
|
|
|
|
New CRJ900
aircraft:
|
4
|
|
|
|
|
Total new
aircraft added:
|
|
|
12
|
|
|
CRJ200 aircraft placed
back into service
|
|
|
15
|
|
|
|
|
|
Removals:
|
|
|
CRJ700
aircraft:
|
|
|
(5)
|
|
|
Aircraft in
scheduled service at December 31, 2018:
|
|
|
596
|
|
|
|
SkyWest's total fleet
in service increased by one aircraft over the last twelve months,
as follows:
|
|
|
|
Aircraft in
scheduled service at December 31, 2017:
|
|
|
595
|
|
|
Additions:
|
|
|
|
|
|
New E175
aircraft:
|
39
|
|
|
|
|
New CRJ900
aircraft:
|
5
|
|
|
|
|
Total new
aircraft added:
|
|
|
44
|
|
|
CRJ200 aircraft placed
back into service
|
|
|
5
|
|
|
|
|
|
Removals,
net:
|
|
|
CRJ700
aircraft:
|
(20)
|
|
|
|
|
CRJ900
aircraft:
|
(16)
|
|
|
|
|
ERJ145
aircraft:
|
(12)
|
|
|
|
|
Total net
removals:
|
|
|
(48)
|
|
|
Aircraft in
scheduled service at December 31, 2018:
|
|
|
596
|
|
SkyWest, Inc. and
Subsidiaries
|
Additional
Operational Information (continued and unaudited)
|
|
|
Completed Block Hours
by Aircraft Type and by Airline
|
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
By Aircraft
Type:
|
2018
|
|
2017
|
|
Variance
%
|
|
2018
|
|
2017
|
|
Variance
%
|
E175s
|
127,616
|
|
98,553
|
|
29.5%
|
|
457,285
|
|
367,601
|
|
24.4%
|
CRJ700/900s
|
109,514
|
|
139,178
|
|
(21.3)%
|
|
482,173
|
|
571,937
|
|
(15.7)%
|
Dual-class
aircraft
|
237,130
|
|
237,731
|
|
(0.3)%
|
|
939,458
|
|
939,538
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
CRJ200s
|
130,530
|
|
135,544
|
|
(3.7)%
|
|
543,165
|
|
543,195
|
|
0.0%
|
ERJ145
|
65,821
|
|
76,820
|
|
(14.3)%
|
|
274,424
|
|
357,046
|
|
(23.1)%
|
50-seat
aircraft
|
196,351
|
|
212,364
|
|
(7.5)%
|
|
817,589
|
|
900,241
|
|
(9.2)%
|
Total Block
Hours
|
433,481
|
|
450,095
|
|
(3.7)%
|
|
1,757,047
|
|
1,839,779
|
|
(4.5)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
By
Airline:
|
2018
|
|
2017
|
|
Variance
%
|
|
2018
|
|
2017
|
|
Variance
%
|
SkyWest
Airlines
|
351,928
|
|
329,182
|
|
6.9%
|
|
1,380,420
|
|
1,237,547
|
|
11.5%
|
ExpressJet
|
81,553
|
|
120,913
|
|
(32.6)%
|
|
376,627
|
|
602,232
|
|
(37.5)%
|
Total Block
Hours
|
433,481
|
|
450,095
|
|
(3.7)%
|
|
1,757,047
|
|
1,839,779
|
|
(4.5)%
|
Quarterly Fleet and
Block Hour Production Forecast for 2019
|
|
|
As of
12/31/2018
|
|
As of
3/31/2019
|
|
As of
6/30/2019
|
|
As of
9/30/2019
|
|
As of
12/31/2019
|
|
|
Fleet (1):
|
(Actual)
|
|
(Estimate)
|
|
(Estimate)
|
|
(Estimate)
|
|
(Estimate)
|
|
|
E175s
|
146
|
|
147
|
|
151
|
|
151
|
|
151
|
|
|
CRJ900s
|
41
|
|
44
|
|
43
|
|
43
|
|
43
|
|
|
CRJ700s
|
109
|
|
99
|
|
96
|
|
94
|
|
94
|
|
|
CRJ200s
|
200
|
|
184
|
|
184
|
|
186
|
|
186
|
|
|
ERJ145s
|
100
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Totals
|
596
|
|
474
|
|
474
|
|
474
|
|
474
|
|
|
|
|
Q4-2018
|
|
Q1-2019
|
|
Q2-2019
|
|
Q3-2019
|
|
Q4-2019
|
|
Total 2019
|
Production
(2):
|
(Actual)
|
|
(Estimate)
|
|
(Estimate)
|
|
(Estimate)
|
|
(Estimate)
|
|
(Estimate)
|
Block Hours
|
433,481
|
|
368,000
|
|
370,000
|
|
375,000
|
|
364,000
|
|
1,477,000
|
|
(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. The December 31, 2018 fleet included 100 ERJ145s, 16
CRJ200s and 10 CRJ700s operated by ExpressJet.
|
|
(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.
|
__________________
|
1 See
Reconciliation of non-GAAP financial measures section of this
release for more information
|
2 See
Reconciliation of non-GAAP financial measures section of this
release for more information
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/skywest-inc-announces-fourth-quarter-2018-profit-300787787.html
SOURCE SkyWest, Inc.