SKYW
$59.95
Skywest
$.72
1.22%
Earnings Details
1st Quarter March 2019
Thursday, April 25, 2019 4:01:00 PM
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Summary

Skywest Beats

Skywest (SKYW) reported 1st Quarter March 2019 earnings of $1.33 per share on revenue of $723.7 million. The consensus earnings estimate was $1.18 per share on revenue of $710.3 million. The Earnings Whisper number was $1.24 per share. Revenue fell 7.6% 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
$1.33
Earnings Whisper
$1.24
Consensus Estimate
$1.18
Reported Revenue
$723.7 Mil
Revenue Estimate
$710.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SkyWest, Inc. Announces First Quarter 2019 Profit

ST. GEORGE, Utah, April 25, 2019 /PRNewswire/ -- SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for Q1 2019, including net income of $88 million, or $1.69 per diluted share, compared to net income of $54 million, or $1.03 per diluted share, for Q1 2018. Adjusted net income in Q1 2019 was $69 million, up 27% from Q1 2018 primarily due to SkyWest's ongoing fleet transition, as SkyWest has added 43 new aircraft since Q1 2018, and reduced aircraft ownership costs resulting from early lease buyouts executed in early 2019.

Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said, "This quarter was significant for SkyWest as we move forward as one airline with a smaller, but more efficient footprint.  Our team performed well this quarter through a series of severe weather events.  We are encouraged with our progress and are working together with our 14,000 employees to deliver the best possible product to our partners."

Financial Highlights
Revenue was $724 million in Q1 2019, down from $783 million in Q1 2018 due to the sale of ExpressJet Airlines ("ExpressJet") in January 2019. Excluding ExpressJet revenue in both periods, revenue increased to $700 million in Q1 2019 from $622 million in Q1 2018 primarily from the impact of adding 35 new E175 and eight new CRJ900 aircraft since Q1 2018.

Operating expenses were $627 million in Q1 2019, down from $695 million in Q1 2018 due to the sale of ExpressJet. Excluding ExpressJet operating expenses in both periods, operating expenses increased to $599 million in Q1 2019 from $528 million in Q1 2018, primarily from the additional aircraft placed into service, higher labor costs and special item operating expenses in Q1 2019. 

The adjusted results for the quarter exclude $24.7 million of pre-tax earnings comprised of the gain on the sale of ExpressJet of $46.6 million (pre-tax) and a $21.9 million (pre-tax) expense primarily due to a non-cash write-off of aircraft manufacturer part credits forfeited to settle future lease return obligations.

Operational Update
Flying contract extension
SkyWest announced today that it has agreed to a multi-year extension with American Airlines ("American") on 38 CRJ700 aircraft.  These aircraft previously had contract maturities scheduled to begin in late 2019.  SkyWest also expects to add two used CRJ700 aircraft to the American contract in Q2 2019 under a multi-year term.

Lease agreement with a third-party for 29 CRJ700 aircraft
SkyWest also announced today that it has agreed to lease 29 CRJ700 aircraft to a third-party for a ten-year term, subject to the finalization of their flying contract.  SkyWest anticipates the aircraft will be placed under lease in increments from mid-2019 to mid-2020. 

Delivery schedule under previously announced agreements
E175 aircraft to be financed by SkyWest and operated for Delta Air Lines ("Delta") and Alaska Airlines ("Alaska"):

  • Took delivery of one aircraft during Q1 2019 (Delta contract)
  • Scheduled to take delivery of four aircraft in Q2 2019 (Delta contract)
  • Scheduled to take delivery of four aircraft in mid-2020 (Delta contract)
  • Scheduled to take delivery of three aircraft in 2021 (Alaska contract)

SkyWest expects to remove a used CRJ900 aircraft from its contract with Delta as each of these ERJ175 aircraft is placed into service with Delta (total of nine CRJ900 expected removals).  As previously announced, SkyWest anticipates leasing five CRJ900s to a third party under a six-year term and returning four CRJ900s to a lessor following removal of service with Delta.

CRJ900 aircraft to be financed by Delta and operated by SkyWest for Delta:

  • Took delivery of three aircraft during Q1 2019
  • Scheduled to take delivery of four aircraft in mid-2019
  • Scheduled to take delivery of eight aircraft in 2020

SkyWest expects to remove a used CRJ700 from its contract with Delta as each of these CRJ900 financed by Delta is placed into service.  As previously announced, SkyWest anticipates transitioning the CRJ700s removed under this arrangement with Delta to an agreement with American.

Joint venture with Regional One
SkyWest entered into a joint venture with Regional One during Q1 2019.  The primary purpose of the joint venture is to lease spare engines to third parties.  SkyWest anticipates initiating transactions through the joint venture beginning in Q2 2019, including the transfer of 14 engines into the joint venture.

Previously announced transactions that closed in Q1 2019
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 an aggregate sales price of $77 million.  SkyWest loaned $26 million to ManaAir in conjunction with the closing. 

SkyWest also completed the previously-announced early leveraged lease buyout on 16 CRJ700s and 36 CRJ200s.  SkyWest used $110 million in Q1 2019 to acquire these aircraft off lease.  SkyWest assumed no debt on these aircraft.

Capital and Liquidity
SkyWest had $544 million in cash and marketable securities at March 31, 2019, down from $689 million at December 31, 2018. During the first quarter of 2019, SkyWest:

  • Used $110 million to acquire 52 CRJ aircraft under an early lease buyout
  • Used $90 million to acquire 16 used CRJ700s previously operated and leased by a SkyWest entity. SkyWest anticipates leasing the majority of airframes and engines to third parties and using a portion of aircraft components as spare parts.
  • Received $51 million net cash from the sale of ExpressJet
  • Used $25 million to repurchase stock, of which $21 million was purchased under SkyWest's $250 million share repurchase program approved during Q1 2019
  • Used $4 million toward the purchase of one E175 aircraft
  • Used $28 million for other capital investments, primarily related to spare engines, aircraft parts and maintenance assets

Total debt at March 31, 2019 was $3.1 billion, down from $3.2 billion as of December 31, 2018.   Q1 2019 ending debt balance included debt issued for one E175 aircraft acquired during the quarter, offset by 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 March 31, 2019



Pre-tax
income


Income tax
benefit
(expense)


Net
income


Net income per
diluted share

GAAP income


$     114,444


$      (26,263)


$      88,181


$     1.69

Q1 2019 adjustments (1)


(24,656)


5,646


(19,010)



Adjusted income


$       89,788


$      (20,617)


$      69,171


$    1.33




(1)

Excludes the gain on the sale of ExpressJet of $46.6 million (pre-tax); also excludes special item operating expenses of $21.9 million (pre-tax), primarily consisting of a non-cash write-off of aircraft manufacturer part credits that SkyWest forfeited to settle future lease return obligations. 

The non-GAAP information presented in this release should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP. The non-GAAP information may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management uses such non-GAAP information for financial and operational decision-making purposes and as a means to evaluate period-over-period comparisons and in forecasting SkyWest's business going forward. Management believes that the presentation of such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, provides additional useful comparative information for investors in their assessment of the underlying performance of SkyWest's business without regard to these items.

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 first quarter 2019 results today, April 25, 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/1088/30064. This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the first quarter 2019 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, efficiency 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 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, 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
March 31


2019


2018

OPERATING REVENUES




  Flying agreements

$      700,001


$     767,964

  Airport customer service and other

23,693


15,436

   Total operating revenues

723,694


783,400





OPERATING EXPENSES




  Salaries, wages and benefits

257,588


306,719

  Aircraft maintenance, materials and repairs      

118,262


141,606

  Depreciation and amortization

89,986


77,585

  Airport-related expenses

30,647


29,307

  Aircraft fuel

25,656


26,939

  Aircraft rentals

20,158


44,680

  Special items

21,869


-

  Other operating expenses

63,109


68,389

   Total operating expenses

627,275


695,225

OPERATING INCOME

96,419


88,175

OTHER INCOME (EXPENSE)




  Interest income

3,807


1,705

  Interest expense

(32,507)


(26,234)

  Other income, net

46,725


3,558

  Total other income (expense), net

18,025


(20,971)





INCOME BEFORE INCOME TAXES

114,444


67,204

PROVISION FOR INCOME TAXES

26,263


12,842

NET INCOME

$      88,181


$      54,362





BASIC EARNINGS PER SHARE

$        1.71


$       1.05

DILUTED EARNINGS PER SHARE

$        1.69


$       1.03





Weighted average common shares




  Basic

51,440


51,921

  Diluted

52,098


53,033

 

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)



March 31,
2019


December 31,
2018

Cash and marketable securities

$        544,282


$       689,329

Other current assets

237,112


331,465

Total current assets

781,394


1,020,794

Property and equipment, net

5,236,966


4,963,732

Deposit on aircraft

37,602


42,012

Other long-term assets

488,570


286,674

Total assets

$     6,544,532


$    6,313,212





Current portion, long-term debt

$        362,797


$        350,206

Other current liabilities

582,530


574,620

Total current liabilities

945,327


924,826





Long-term debt, net of current maturities

2,734,317


2,809,768

Other long-term liabilities

864,321


614,337

Stockholders' equity

2,000,567


1,964,281

Total liabilities and stockholders' equity

$     6,544,532


$     6,313,212

 

Unaudited Operating Highlights – SkyWest Airlines



Three Months Ended
March 31,


2019

2018

 Change

Block hours

349,389

328,944

6.2%

Departures

193,475

185,478

4.3%





Adjusted flight completion

99.9%

99.8%

0.1 pts

Raw flight completion

96.4%

97.8%

(1.4) pts





Passengers carried

9,614,952

9,059,473

6.1%

Passenger load factor

78.6%

78.8%

(0.2) pts





Average passenger trip length

507

493

2.8%

On January 22, 2019, SkyWest completed the sale of ExpressJet to a third party.  The unaudited operating highlights above include SkyWest Airlines only and exclude ExpressJet in both periods for comparability purposes.

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

SkyWest, Inc. and Subsidiaries
Additional Operational Information (unaudited)

SkyWest's total fleet in service decreased by 120 aircraft during Q1 2019, as follows:

Aircraft in scheduled service at December 31, 2018:



596


Additions:





New E175 aircraft:

1




New CRJ900 aircraft:

3




Total new aircraft added:



4


Used aircraft transitioned back into service, net



3


ExpressJet removals:





ERJ145 aircraft:

(100)




CRJ200 aircraft:

(16)




CRJ700 aircraft:

(10)







(126)


SkyWest Airlines removal:





CRJ900 aircraft:



(1)


Aircraft in scheduled service at March 31, 2019:



476


SkyWest's total fleet in service decreased by 104 aircraft over the last twelve months, as follows:

Aircraft in scheduled service at March 31, 2018:



580


Additions:





New E175 aircraft:

35




New CRJ900 aircraft:

8




Total new aircraft added:



43


Used aircraft transitioned back into service, net



3



ExpressJet removals:





ERJ145 aircraft:

(100)




CRJ700 aircraft:

(43)




CRJ900 aircraft:

(6)







(149)


SkyWest Airlines removal:





CRJ900 aircraft:



(1)


Aircraft in scheduled service at March 31, 2019:



476








 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)


Completed Block Hours by Aircraft Type



Three months ended March 31,

SkyWest Airlines:

2019


2018


Variance %

E175s

126,749


99,592


27.3%

CRJ900s

30,965


27,996


10.6%

CRJ700s

71,768


66,347


8.2%

CRJ200s

119,907


135,009


(11.2)%

Total Block Hours

349,389


328,944


6.2%







 

Aircraft in Scheduled Service 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





SkyWest Airlines aircraft (1):

(Actual)


(Actual)


(Estimate)


(Estimate)


(Estimate)





E175s

146


147


151


151


151





CRJ900s

41


43


43


43


43





CRJ700s

99


99


96


96


96





CRJ200s

184


187


184


184


184





Total SkyWest Airlines

470


476


477


477


477




















As of
12/31/2018













ExpressJet aircraft (1):

(Actual)













ERJ145s

100













CRJ200s

16













CRJ700s

10













Total ExpressJet

126





























Q4-2018


Q1-2019


Q2-2019


Q3-2019


Q4-2019


Total 2019


SkyWest Airlines (2):


(Actual)


(Actual)


(Estimate)


(Estimate)


(Estimate)


(Estimate)


Block Hours


351,928


349,389


370,000


375,000


364,000


1,458,000




(1)

The aircraft count in the table above excludes aircraft removed from SkyWest's scheduled service. Actual fleet counts may vary from the forecast due to timing of aircraft removed from service, timing of aircraft placed into service when transitioning between flying contracts, and timing of new aircraft deliveries.    




As of March 31, 2019, SkyWest was leasing 20 CRJ200s to third parties and removed one CRJ900 from scheduled service in preparation for a third-party lease (these aircraft are excluded from the table above).  



(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. Actual block hours presented for Q4-2018 and Q1-2019 in the table above exclude block hours operated by ExpressJet prior to the sale of ExpressJet on January 22, 2019ExpressJet generated approximately 17,000 block hours in the month of January 2019 through the date of sale. ExpressJet also generated 81,500 block hours in Q4-2018.

 





1 See Reconciliation of non-GAAP financial measures section of this release for more information

 

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SOURCE SkyWest, Inc.