ST. GEORGE, Utah, July 30, 2020 /PRNewswire/ --
Second Quarter Results
- Net loss of $26 million, pre-tax
loss of $33 million, or $0.51 loss per share
- SkyWest took delivery of 21 used E175 aircraft under a
previously-announced agreement with United Airlines
- SkyWest took delivery of two new E175 aircraft and three used
E175 aircraft under a previously-announced agreement with Delta Air
Lines
SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported
financial and operating results for Q2 2020, including net loss of
$26 million, or $0.51 per share, compared to net income of
$88 million, or $1.71 per diluted share, for Q2 2019. The primary
factor in SkyWest's lower results in Q2 2020 compared to Q2 2019
was reduced flight schedules and lower demand resulting from the
COVID-19 pandemic.
Commenting on the results, Chip
Childs, Chief Executive Officer of SkyWest, said, "COVID-19
continues to cause unprecedented disruption across the airline
industry. The safety and well-being of our people and passengers
remains our main focus. Maintaining strong liquidity and working
collaboratively with our partners are our other priorities. I want
to thank our 14,000 employees for their dedication to our
passengers, each other and our mission during this pandemic."
Financial Results
Revenue was $350 million in Q2 2020, down from $744 million in Q2 2019, due to the COVID-19
pandemic that caused a significant reduction in the number of
scheduled flights SkyWest operated under its flying contracts
compared to the same period last year. SkyWest deferred recognizing
revenue on $69 million of fixed
monthly payments received during Q2 2020. Under GAAP, the fixed
monthly payments are recognized as revenue ratably based on
completed flights over the contract term. Due to the significantly
lower than normal number of flights completed during Q2 2020, the
amount of cash received exceeded the revenue recognized based on
the number of flights completed during the quarter. SkyWest will
recognize the deferred revenue based on completed flights over the
remaining contract term.
SkyWest additionally experienced reduced passenger demand on
flights operated under its prorate agreements compared to the same
period last year, also driven by the COVID-19 pandemic. Total block
hours, including flights operated under SkyWest's contract and
prorate agreements, were down 66% in Q2 2020 from Q2 2019.
Operating expenses were $354
million in Q2 2020, down from $600
million in Q2 2019 due to fewer flights operated compared to
the same period last year, and $152
million in CARES Act payroll support (described under
"Capital and Liquidity" below) recognized as an offset to salaries
and wages expense in Q2 2020.
Operational Update on Previously Announced
Deals
SkyWest is coordinating with its major airline
partners to optimize the timing of upcoming fleet deliveries under
previously announced deals in response to COVID-19 schedule
reductions. The anticipated future delivery dates summarized below
are based on currently available information and are subject to
change.
Flying contract with United Airlines ("United")
Twenty-five used E175 aircraft financed by United and operated by
SkyWest:
- 21 used E175s were delivered during Q2 2020
- All 25 used aircraft have been delivered under this agreement
as of June 30, 2020
Flying contract with Delta Air Lines ("Delta")
Six new E175 aircraft to be financed and operated by SkyWest:
- Two new E175 aircraft were delivered during Q2 2020
- Four new E175 aircraft are scheduled for delivery by the end of
2020
- Normal cash down-payments are already covered by deposits paid
last year
Six used E175s and one new CRJ900 aircraft financed by Delta and
operated by SkyWest:
- Three used E175 aircraft were delivered during Q2 2020
- All six used E175 aircraft have been delivered under this
agreement as of June 30, 2020
- One new CRJ900 aircraft is scheduled for delivery by the end of
2020
SkyWest still anticipates removing four CRJ900 aircraft and one
CRJ700 aircraft from its flying agreement with Delta by the end of
2020.
Flying contract with American Airlines ("American")
Twenty new E175 aircraft to be financed and operated by
SkyWest:
- Aircraft deliveries are anticipated from Q4 2021 through
mid-2022
- SkyWest anticipates financing the aircraft through debt
Fleet changes under the American flying agreements
SkyWest has a flying contract with American to operate a total of
70 CRJ700 aircraft, of which 61 aircraft were in-service at
June 30, 2020. SkyWest anticipates
placing the remaining nine aircraft in-service from late 2020
through the first half of 2021. SkyWest and American also
terminated the prorate flying agreement for seven CRJ200 aircraft
during Q2 2020.
Delta flying contract for CRJ200 aircraft
As previously announced, SkyWest's capacity purchase agreement with
Delta for CRJ200 aircraft is scheduled to expire in 2020. SkyWest
removed 19 Delta leased CRJ200 aircraft from the contract during Q2
2020. SkyWest owns the remaining 36 CRJ200 aircraft under contract
and has no outstanding financing obligations on these aircraft.
SkyWest anticipates removing the remaining 36 CRJ200s from the
contract by the end of 2020.
Lease agreement with a third party for CRJ700 aircraft
As of June 30, 2020, SkyWest had 13
CRJ700 aircraft under a previously-announced lease agreement with a
third party under a ten-year lease term. Due to the demand
disruption from COVID-19, the parties have suspended placement of
additional CRJ700 aircraft under this lease agreement.
Capital and Liquidity
SkyWest had $762 million in cash
and marketable securities at June 30,
2020, up from $578 million at
March 31, 2020. As previously
announced, SkyWest entered into a Payroll Support Program Agreement
("PSP Agreement") with the U.S. Treasury Department under the
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") in
April 2020. Pursuant to the PSP
Agreement, SkyWest expects to receive from Treasury installments
totaling approximately $438 million,
including approximately $337 million
in the form of direct grants and approximately $101 million in the form of unsecured debt.
During Q2 2020, SkyWest received $307
million in payroll support under the PSP Agreement, of which
$62 million was unsecured debt.
SkyWest anticipates receiving the remaining payroll support amount
of $131 million during Q3 2020, of
which $39 million will be unsecured
debt.
Capital expenditures during Q2 2020 included $43 million for the acquisition of two new E175
aircraft that were financed through debt and previously-made
deposits and $50 million for spare
engines and other maintenance assets.
Total debt at June 30, 2020 was
$3.0 billion, up from $2.9 billion as of March
31, 2020. The higher debt was driven by an increase of
$62 million from the CARES Act
payroll support unsecured loan, and $36
million from the two newly-delivered E175s. SkyWest expects
the CARES Act payroll support unsecured loan will increase by
$39 million to a total of
$101 million by the end of Q3 2020.
As of June 30, 2020, SkyWest had a
$75 million line of credit facility.
SkyWest had approximately $9 million
of letters of credit issued under the facility and $66 million available under the line.
In July 2020, SkyWest executed a
non-binding letter of intent with the U.S. Treasury Department for
approximately $497 million in secured
loans under the CARES Act. SkyWest is currently evaluating the
timing and level of participation in this loan program.
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 passengers to over 250
destinations throughout North
America. SkyWest Airlines operates through partnerships with
United Airlines, Delta Air Lines, American Airlines and Alaska
Airlines carrying more than 43 million passengers in 2019.
SkyWest will host its conference call to discuss second quarter
2020 results today, July 30, 2020, 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/1088/35665. This press
release and additional information regarding SkyWest, including
access information for the digital rebroadcast of the second
quarter 2020 results call, participation at investor conferences
and investor presentations 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 expected terms, timing and
benefits of the CARES Act funding, the impact of the COVID-19
outbreak on SkyWest's business, financial condition and results of
operations, the scheduled aircraft deliveries for SkyWest Airlines
in upcoming years, and related removal from service and/or
placement into service of certain aircraft, SkyWest's coordination
with major airline partners to optimize the delivery of aircraft
under previously announced deals, the expected terms, timing and
benefits related to SkyWest's leasing and joint venture
transactions, 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, uncertainties regarding the impact of the CARES Act funding on
SkyWest's business and operations, the consequences of the COVID-19
outbreak to economic conditions, the travel industry and our major
partners in general and the financial condition and operating
results of SkyWest in particular, 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 existing
global COVID-19 pandemic and the outbreak of any other disease or
similar public health threat that affects travel demand or travel
behavior; 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,
including related to the duration and impact of the COVID-19
pandemic, and related decreases in customer demand and spending;
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; estimated useful life of long-lived
assets, 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; 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, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K.
SkyWest, Inc. and
Subsidiaries
Condensed
Consolidated Statements of Income (Loss)
(Dollars and Shares
in Thousands, Except per Share Amounts)
(Unaudited)
|
|
|
|
Three Months
Ended June
30
|
|
Six Months
Ended June
30
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
OPERATING
REVENUES
|
|
|
|
|
|
|
|
|
Flying
agreements
|
$
336,370
|
|
$
725,335
|
|
$
1,045,864
|
|
$
1,425,336
|
|
Lease, airport
services and other
|
13,669
|
|
19,048
|
|
34,111
|
|
42,741
|
|
Total
operating revenues
|
350,039
|
|
744,383
|
|
1,079,975
|
|
1,468,077
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Salaries,
wages and benefits
|
170,218
|
|
243,766
|
|
419,379
|
|
501,354
|
|
Aircraft
maintenance, materials and
repairs
|
121,289
|
|
124,789
|
|
281,505
|
|
243,051
|
|
Depreciation
and amortization
|
131,638
|
|
90,148
|
|
243,346
|
|
180,134
|
|
Airport-related expenses
|
21,550
|
|
30,782
|
|
52,190
|
|
61,429
|
|
Aircraft
fuel
|
6,821
|
|
30,851
|
|
32,234
|
|
56,507
|
|
Aircraft
rentals
|
16,697
|
|
18,006
|
|
33,752
|
|
38,164
|
|
CARES Act
payroll support grant
|
(151,938)
|
|
-
|
|
(151,938)
|
|
-
|
|
Special
items
|
-
|
|
-
|
|
-
|
|
21,869
|
|
Other
operating expenses
|
38,167
|
|
61,948
|
|
107,589
|
|
125,057
|
|
Total
operating expenses
|
354,442
|
|
600,290
|
|
1,018,057
|
|
1,227,565
|
|
OPERATING INCOME
(LOSS)
|
(4,403)
|
|
144,093
|
|
61,918
|
|
240,512
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
income
|
1,685
|
|
3,731
|
|
4,249
|
|
7,538
|
|
Interest
expense
|
(30,926)
|
|
(32,770)
|
|
(61,130)
|
|
(65,278)
|
|
Other income,
net
|
402
|
|
281
|
|
800
|
|
47,006
|
|
Total other
income (expense), net
|
(28,839)
|
|
(28,758)
|
|
(56,081)
|
|
(10,734)
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE
INCOME TAXES
|
(33,242)
|
|
115,335
|
|
5,837
|
|
229,778
|
|
PROVISION (BENEFIT)
FOR INCOME TAXES
|
(7,527)
|
|
27,283
|
|
1,564
|
|
53,545
|
|
NET INCOME
(LOSS)
|
$
(25,715)
|
|
$
88,052
|
|
$
4,273
|
|
$
176,233
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS (LOSS)
PER SHARE
|
$
(0.51)
|
|
$
1.72
|
|
$
0.09
|
|
$
3.44
|
|
DILUTED EARNINGS
(LOSS) PER SHARE
|
$
(0.51)
|
|
$
1.71
|
|
$
0.08
|
|
$
3.40
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares
|
|
|
|
|
|
|
|
|
Basic
|
50,140
|
|
51,145
|
|
50,208
|
|
51,293
|
|
Diluted
|
50,140
|
|
51,477
|
|
50,357
|
|
51,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SkyWest, Inc. and
Subsidiaries
Summary of
Consolidated Balance Sheets
(Dollars in
Thousands)
(Unaudited)
|
|
|
|
June
30, 2020
|
|
December
31, 2019
|
Cash and marketable
securities
|
$
762,070
|
|
$
520,172
|
Other current
assets
|
183,779
|
|
240,174
|
Total current
assets
|
945,849
|
|
760,346
|
Property and
equipment, net
|
5,286,433
|
|
5,345,823
|
Deposit on
aircraft
|
40,263
|
|
48,858
|
Other long-term
assets
|
500,838
|
|
502,102
|
Total
assets
|
$
6,773,383
|
|
$
6,657,129
|
|
|
|
|
Current portion,
long-term debt
|
$
309,159
|
|
$
364,126
|
Other current
liabilities
|
677,028
|
|
560,550
|
Total current
liabilities
|
986,187
|
|
924,676
|
|
|
|
|
Long-term debt, net
of current maturities
|
2,664,122
|
|
2,628,989
|
Other long-term
liabilities
|
980,112
|
|
928,450
|
Stockholders'
equity
|
2,142,962
|
|
2,175,014
|
Total liabilities and
stockholders' equity
|
$
6,773,383
|
|
$
6,657,129
|
SkyWest, Inc. and
Subsidiaries
Additional
Operational Information (unaudited)
|
|
SkyWest's fleet in
scheduled service by aircraft type:
|
|
|
June 30,
2020
|
March 31,
2020
|
June 30,
2019
|
E175
aircraft
|
189
|
163
|
151
|
CRJ900
aircraft
|
43
|
43
|
42
|
CRJ700
aircraft
|
86
|
88
|
99
|
CRJ200
aircraft
|
153
|
190
|
190
|
Total
aircraft
|
471
|
484
|
482
|
As of June 30, 2020, SkyWest
leased four CRJ200s, 13 CRJ700s and five CRJ900s to third parties
(these aircraft are excluded from the table above).
Selected
operational data:
|
|
|
Three months ended
June 30,
|
|
Six months ended June
30,
|
|
2020
|
2019
|
Change
|
|
2020
|
2019
|
Change
|
Block hours by
aircraft type:
|
|
|
|
|
|
|
|
E175s
|
61,455
|
133,247
|
(53.9)%
|
|
194,134
|
259,996
|
(25.3)%
|
CRJ900s
|
3,433
|
31,428
|
(89.1)%
|
|
32,353
|
62,393
|
(48.1)%
|
CRJ700s
|
30,666
|
77,068
|
(60.2)%
|
|
98,740
|
148,836
|
(33.7)%
|
CRJ200
|
30,472
|
129,039
|
(76.4)%
|
|
158,022
|
248,946
|
(36.5)%
|
Total block
hours
|
126,026
|
370,782
|
(66.0)%
|
|
483,249
|
720,171
|
(32.9)%
|
|
|
|
|
|
|
|
|
Departures
|
80,755
|
215,052
|
(62.4)%
|
|
290,038
|
408,527
|
(29.0)%
|
Adjusted flight
completion
|
99.9%
|
99.9%
|
0.0 pts
|
|
99.9%
|
99.9%
|
0.0 pts
|
Raw flight
completion
|
99.7%
|
98.3%
|
1.4 pts
|
|
96.4%
|
97.4%
|
(1.0) pts
|
Passengers
carried
|
1,802,237
|
11,383,187
|
(84.2)%
|
|
10,666,833
|
20,998,133
|
(49.2)%
|
Passenger load
factor
|
34.4%
|
83.9%
|
(49.5)pts
|
|
58.0%
|
81.4%
|
(23.4) pts
|
Average trip
length
|
487
|
496
|
(1.8)%
|
|
492
|
501
|
(1.8)%
|
Adjusted flight completion percent excludes weather
cancellations. Raw flight completion includes weather
cancellations.
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SOURCE SkyWest, Inc.