SKYW
$58.85
Skywest
($.55)
(.93%)
Earnings Details
2nd Quarter June 2018
Thursday, July 26, 2018 4:01:00 PM
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Summary

Skywest (SKYW) Recent Earnings

Skywest (SKYW) reported 2nd Quarter June 2018 earnings of $1.43 per share on revenue of $805.5 million. The consensus earnings estimate was $1.23 per share on revenue of $804.8 million. Revenue fell 0.5% compared to the same quarter a year ago.

SkyWest Inc, through its subsidiaries offers scheduled passenger service to destinations in the United States, Canada, Mexico and the Caribbean.

Results
Reported Earnings
$1.43
Earnings Whisper
-
Consensus Estimate
$1.23
Reported Revenue
$805.5 Mil
Revenue Estimate
$804.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SkyWest, Inc. Announces Second Quarter 2018 Profit

ST. GEORGE, Utah, July 26, 2018 /PRNewswire/ --

Second Quarter Highlights:

  • Net income of $76 million, or $1.43 per diluted share, up from $50 million or $0.95 per diluted share in Q2 2017
  • Pre-tax income of $98 million, up 21% from $81 million in Q2 2017
  • New agreement to operate 20 new CRJ900s for Delta Air Lines under a nine-year term, replacing 20 CRJ700s expiring from contract
  • New agreement to place 20 used CRJ700s with American Airlines under a four-year term
  • Three-year extension on 19 CRJ700s scheduled to expire in 2019/2020 with United Airlines
  • New agreement to place 20 internally-sourced CRJ200s under a three-year contract with United

SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for Q2 2018, including net income of $76 million, or $1.43 per diluted share, compared to net income of $50 million, or $0.95 per diluted share for Q2 2017.  Q2 2018 pre-tax income of $98 million increased 21% from Q2 2017 and was primarily due to SkyWest's ongoing fleet transition. Since Q2 2017, SkyWest added 23 new E175 aircraft and removed 34 CRJ700/CRJ900 aircraft and 32 CRJ200/ERJ145 aircraft.

Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said "We are focused on remaining disciplined in our execution of fleet solutions that meet the needs of our customers.  The agreements and extensions announced this quarter are expected to continue to improve our fleet mix in alignment with our overall fleet transition strategy. I appreciate the dedicated service our professionals consistently provide to our customers."   

Flying Agreement Announcements
Delta:

SkyWest Airlines, Inc. ("SkyWest Airlines") reached an agreement with Delta Air Lines ("Delta") to operate 20 new Bombardier CRJ900 aircraft under a nine-year flying contract.  The aircraft will be acquired by Delta under a previously announced agreement with Bombardier and operated by SkyWest AirlinesSkyWest Airlines anticipates placing the 20 CRJ900s into service beginning late 2018 through 2020. These aircraft will have the ATMOSPHÈRE cabin with a 70-seat, dual-class configuration and will replace 20 CRJ700s scheduled to expire under SkyWest's flying contracts with Delta. 

American:

SkyWest Airlines reached an agreement with American Airlines ("American") to place 20 used CRJ700s under a four-year contract.  The 20 CRJ700s are expected to be sourced from within SkyWest's fleet.  The first aircraft in this agreement was placed into service in June 2018 and all 20 aircraft are scheduled to be in service by early 2019.

United:

SkyWest Airlines reached an agreement with United Airlines ("United") to extend their existing flying contract on 19 CRJ700s operated by SkyWest Airlines.  These aircraft previously had contract expirations scheduled for mid-2019/2020 and were extended for three years.

Separately, ExpressJet Airlines, Inc. ("ExpressJet") reached an agreement with United to a three-year contract for 20 used CRJ200s.  The 20 CRJ200s are expected to be sourced from within SkyWest's fleet through contract expirations with other partners scheduled for the second half of 2018.  The 20 CRJ200s are expected to be placed into service with United between the latter part of 2018 and early 2019.

Financial Highlights
Revenue was $806 million in Q2 2018, up from $792 million in Q2 2017. The increase in revenue included the net impact of adding 23 new E175 aircraft and other economic improvements within SkyWest's fleet mix since Q2 2017, partially offset by the removal of unprofitable or less-profitable aircraft over the same period. 

Operating expenses were $679 million in Q2 2018, down from $685 million in Q2 2017.  The decrease in operating expenses was primarily due to the reduction in direct operating costs with the net removal of 43 aircraft from service.

The effective tax rate for Q2 2018 was 23% compared to 38% in Q2 2017.  The lower tax rate in Q2 2018 was primarily due to the reduced federal rate under the new tax law enacted in Q4 2017.

Operational Update
SkyWest Airlines took delivery of 14 new E175/E175 SC aircraft during Q2 2018.  The following summarizes the anticipated delivery dates for three E175 aircraft to be placed under contract with Alaska Airlines and 17 E175 SC aircraft to be placed under contract with Delta for the second half of 2018:


In-service


Scheduled E175/E175 SC

aircraft deliveries


Anticipated
in-service



June 30, 2018


Q3 2018

Q4 2018


Dec 31, 2018


Total E175/E175 SCs:

126


15

5


146


ExpressJet continued the previously-announced wind down of its flying agreement with Delta during the quarter.  At the end of Q2 2018, ExpressJet had 22 CRJ700s remaining in service under the Delta agreement.  ExpressJet continues to engage in discussions around the CRJ700s scheduled to come out of service with Delta later this year and remains positive with alternative opportunities to utilize these CRJ700 aircraft.

ExpressJet anticipates its flying contract with American for 12 CRJ700s scheduled to terminate in early 2019 will not be extended.  These aircraft are expected to be returned to the lessors following removal of service with American.

Operating Performance:

Flight completion rates at SkyWest Airlines and ExpressJet for Q2 2018 and Q2 2017 were:



SkyWest Airlines


ExpressJet



Q2 2018

Q2 2017


Q2 2018

Q2 2017

Adjusted Completion *


99.9%

99.9%


99.9%

99.9%

Raw Completion


98.9%

98.9%


98.8%

97.6%


* Adjusted Completion excludes weather cancellations. Raw Completion includes weather cancellations.

Capital and Liquidity

SkyWest had $649 million in cash and marketable securities at June 30, 2018, slightly up from March 31, 2018. During the second quarter of 2018, SkyWest:

  • Used $50 million toward the purchase of 14 E175 aircraft
  • Used $35 million for other capital investments, including spare engines and aircraft parts

Total debt at June 30, 2018 was $3.0 billion, up $193 million from March 31, 2018, which included debt issued for 14 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 second quarter 2018 results today, July 26, 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/1088/26425.  This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the second 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 agreement with Delta, and the related removal from service and/or placement into service of certain aircraft, the scheduled aircraft deliveries for SkyWest Airlines for 2018, 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 statement. 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

June 30


Six Months Ended

June 30



2018


2017


2018


2017


OPERATING REVENUES









   Flying agreements

$          793,637


$         781,724


$        1,561,602


$        1,516,253


   Airport customer service and other

11,878


9,788


27,313


22,425


     Total operating revenues

$          805,515


$         791,512


$        1,588,915


$        1,538,678











OPERATING EXPENSES









   Salaries, wages and benefits

$          293,677


$         294,795


$           600,396


$           592,462


   Aircraft maintenance, materials and repairs             

139,774


152,356


281,380


284,681


   Depreciation and amortization

82,714


71,206


160,298


141,320


   Aircraft rentals

37,508


55,413


82,188


113,123


   Aircraft fuel

30,011


20,071


56,950


38,504


   Airport-related expenses

25,890


28,949


55,197


60,897


   Other operating expenses

69,263


62,126


137,653


124,801


     Total operating expenses

$          678,837


$         684,916


$        1,374,062


$        1,355,788


OPERATING INCOME

$          126,678


$         106,596


$           214,853


$           182,890


OTHER INCOME (EXPENSE)









   Interest income

$              1,705


$             1,330


$              3,409


$               1,990


   Interest expense

(28,811)


(27,063)


(55,045)


(51,612)


   Other income (loss), net

(1,245)


-


2,313


-


   Total other expense, net

$         (28,351)


$        (25,733)


$          (49,323)


$          (49,622)











INCOME BEFORE INCOME TAXES

$           98,327


$           80,863


$          165,530


$          133,268


PROVISION FOR INCOME TAXES

22,468


30,386


35,310


48,005


NET INCOME

$           75,859


$           50,477


$          130,220


$            85,263











BASIC EARNINGS PER SHARE

$               1.46


$              0.98


$               2.51


$               1.65


DILUTED EARNINGS PER SHARE

$               1.43


$              0.95


$               2.46


$               1.61











Weighted average common shares









   Basic

52,046


51,751


51,983


51,785


   Diluted

52,913


52,977


52,973


53,090





















 

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)






June 30,

2018


December 31,

2017

Cash and marketable securities

$         649,090


$         685,295

Other current assets

326,135


309,838

Total current assets

$         975,225


$         995,133

Property and equipment, net

4,610,204


4,134,003

Deposit on aircraft

49,000


49,000

Other long-term assets

278,664


296,264

Total assets

$      5,913,093


$       5,474,400





Current portion, long-term debt

$         353,743


$         309,678

Other current liabilities

524,852


511,147

Total current liabilities

$         878,595


$         820,825





Long-term debt, net of current maturities

2,615,637


2,377,346

Other long-term liabilities

558,209


521,907

Stockholders' equity

1,860,652


1,754,322

Total liabilities and stockholders' equity

$      5,913,093


$      5,474,400

 

Unaudited Operating Highlights






Three Months Ended

June 30,


Six Months Ended

June 30,


2018

2017

 Change


2018

2017

 Change

Block hours

439,174

467,100

(6.0)%


875,541

919,783

(4.8)%

Departures

255,561

280,326

(8.8)%


503,688

544,188

(7.4)%









Passengers carried

12,339,631

13,364,974

(7.7)%


23,659,861

25,385,351

(6.8)%

Passenger load factor

81.9%

81.8%

  0.1 pts


79.7%

80.3%

 (0.6) pts









Average passenger trip length

522

511

2.2%


523

515

1.6%


























 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)


SkyWest's total fleet in service increased by three aircraft during Q2 2018, as follows:


 

Aircraft in scheduled service at March 31, 2018:



580


Additions:





New E175/E175 SC aircraft:



14


           Removals, net:



CRJ900 aircraft:

(6)




CRJ700 aircraft:

(4)




CRJ200 aircraft:

(1)




             Total net removals:



(11)


Aircraft in scheduled service at June 30, 2018:



583


 

SkyWest's total fleet in service decreased by 43 aircraft over the last twelve months, as follows:


Aircraft in scheduled service at June 30, 2017:



626


Additions:





New E175/E175 SC aircraft:



23


               Removals, net:



CRJ900 aircraft:

(28)




CRJ700 aircraft:

(6)




ERJ145/135 aircraft:

(24)




CRJ200 aircraft:

(8)




Total net removals:



(66)


Aircraft in scheduled service at June 30, 2018:



583








 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)


Completed Block Hours by Aircraft Type and by Airline



Three months ended June 30


Six months ended June 30


By Aircraft Type:

2018


2017


Variance
%


2018


2017


Variance
%


E175s

109,383


90,051


21.5%


208,975


169,979


22.9%


CRJ700/900s

122,930


145,565


(15.5)%


251,745


282,426


(10.9)%


Dual-class aircraft

232,313


235,616


(1.4)%


460,720


452,405


1.8%















CRJ200s

139,768


137,477


1.7%


274,777


270,751


1.5%


ERJ145/135s

67,093


94,007


(28.6)%


140,044


196,627


(28.8)%


50-seat aircraft

206,861


231,484


(10.6)%


414,821


467,378


(11.2)%


Total Block Hours

439,174


467,100


(6.0)%


875,541


919,783


(4.8)%





























Three months ended June 30


Six months ended June 30


By Airline:

2018


2017


Variance
%


2018


2017


Variance
%


SkyWest Airlines

344,284


303,921


13.3%


673,228


581,756


15.7%


ExpressJet

94,890


163,179


(41.8)%


202,313


338,027


(40.1)%


Total Block Hours

439,174


467,100


(6.0)%


875,541


919,783


(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)


(Estimate)


(Estimate)





E175/175SCs

107


112


126


141


146





CRJ700/900s

181


169


159


150


142





CRJ200s

195


199


198


197


197





ERJ145s/135s

112


100


100


100


100





Totals

595


580


583


588


585






















Q4-2017


Q1-2018


Q2-2018


Q3-2018


Q4-2018


Total 2018


Production (2):


(Actual)


(Actual)


(Actual)


(Estimate)


(Estimate)


(Estimate)


Block Hours


450,095


436,367


439,174


445,000


432,000


1,752,000



(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.

 

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SOURCE SkyWest, Inc.