SKYW
$37.70
Skywest
Earnings Details
1st Quarter March 2017
Thursday, April 27, 2017 4:01:00 PM
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Summary

Skywest (SKYW) Recent Earnings

Skywest (SKYW) reported 1st Quarter March 2017 earnings of $0.65 per share on revenue of $765.4 million. The consensus earnings estimate was $0.52 per share on revenue of $745.2 million. Revenue grew 0.4% on a year-over-year basis.

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

Results
Reported Earnings
$0.65
Earnings Whisper
-
Consensus Estimate
$0.52
Reported Revenue
$765.4 Mil
Revenue Estimate
$745.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SkyWest, Inc. Announces First Quarter 2017 Profit

SkyWest, Inc. (SKYW) ("SkyWest") today reported financial and operating results for the first quarter of 2017, including net income of $35 million, or $0.65 per diluted share, compared to net income of $27 million, or $0.52 per diluted share for Q1 2016. The improvement in pre-tax income over Q1 2016 was primarily due to SkyWest’s continued fleet transition, including the addition of 45 new E175s, and the removal of 45 ERJ145s and 16 CRJ200s since Q1 2016. Additionally, since Q1 2016 SkyWest has transitioned 38 CRJ700s it previously operated under agreements with other major airline partners to American Airlines, Inc. ("American") under a multi-year agreement, further reducing fleet risk.

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Commenting on the results, Chip Childs, SkyWest, Inc. Chief Executive Officer said, "Despite the weather challenges we faced at the beginning of the quarter, our dedicated teams worked hard to minimize passenger disruption. The solid operating performance, combined with continued execution on our fleet transition, delivered a stronger than expected March which is reflected in our improved profitability this quarter. Our first quarter results reflect the outstanding work our professionals do each day to provide an excellent product to our customers."

Q1 2017 Financial Highlights

Revenue was $765 million in Q1 2017, up from $762 million in Q1 2016. The increase in revenue included the net impact of adding 45 new E175 aircraft since Q1 2016 (of which seven were delivered in Q1 2017), partially offset by the removal of unprofitable or less profitable aircraft over the same period, including 45 ERJ145s, 16 CRJ200s and eight CRJ700s.

Operating expenses were $689 million in Q1 2017, down from $700 million in Q1 2016. The decrease was primarily due to lower direct operating costs from 24 fewer aircraft in service and a 7% reduction in block hour production, partially offset by higher fuel costs and crew training costs associated with the new E175 aircraft deliveries.

Net income for Q1 2017 included a $3 million income tax benefit related to accounting rule changes around equity compensation adopted January 1, 2017, resulting in an effective tax rate of 34% for the quarter. SkyWest expects an effective tax rate of approximately 38-39% for each of the next three quarters, and an effective tax rate for the 2017 year of approximately 37-38%. Diluted shares used in SkyWest’s earnings per share calculation also increased by approximately 350,000 shares related to the same accounting rule changes.

Q1 2017 Operational Update

Dual-Class Aircraft (E175s, CRJ700s and CRJ900s):

SkyWest Airlines, Inc. ("SkyWest Airlines") took delivery of seven E175s during Q1 2017. SkyWest’s scheduled deliveries of its remaining E175 firm orders are below:

Scheduled E175 Deliveries
Total in-service Q2 2017
Q4 2017
Total anticipated
March 31, 2017
in-service
by end of 2017
United
60
5
-
65
Alaska
20
-
-
20
Delta
13
5
1
19
Total E175s: 93
10
1
104

As of March 31, 2017, SkyWest Airlines and ExpressJet Airlines, Inc. ("ExpressJet") had a total of 38 CRJ700s under a multi-year contract with American. Between SkyWest Airlines and ExpressJet, a total of 49 CRJ700s are expected to be in service with American by the end of Q3 2017. The 49 CRJ700s scheduled for service with American were previously operated by SkyWest Airlines and ExpressJet with other major airline partners.

50-seat Aircraft (CRJ200s and ERJ145/135s):

As of March 31, 2017, SkyWest had 208 CRJ200s and 137 ERJ145/135s in scheduled service. SkyWest anticipates it will reduce its CRJ200s by approximately 30 aircraft and its ERJ145/135s by approximately 37 aircraft by the end of 2017. As previously announced, ExpressJet anticipates it will transition to flying primarily dual-class aircraft in its CRJ operation by removing its CRJ200 aircraft from service by the end of 2017.

Operating Performance:

Flight completion rates at SkyWest Airlines and ExpressJet for Q1 2017 and Q1 2016 are summarized as follows:

SkyWest Airlines
ExpressJet
Q1 2017
Q1 2016
Q1 2017 Q1 2016
Adjusted Completion *
99.9%
99.8%
99.6%
99.9%
Raw Completion
97.4%
97.8%
96.9%
97.2%
* Adjusted Completion excludes weather cancellations. Raw Completion includes weather cancellations.

Q1 2017 Capital and Liquidity

SkyWest had $586 million in cash and marketable securities at March 31, 2017, up $21 million from December 31, 2016 and up $144 million from March 31, 2016. During the first quarter, SkyWest used $17 million in cash and $11 million in previously paid deposits toward the purchase of seven E175 aircraft. SkyWest also repurchased $10 million of SkyWest common stock under its $100 million share repurchase program.

SkyWest issued $158 million in long-term debt during Q1 2017 to finance seven E175s delivered during the quarter. Total debt increased by $69 million during the first quarter from the new E175 aircraft acquired, net of scheduled principal payments.

In Q1 2017, excluding aircraft purchased, SkyWest used $26 million for other capital investments, including spare engines and aircraft parts.

About SkyWest

SkyWest, Inc. is the holding company for two scheduled passenger airline operations and an aircraft leasing company. SkyWest’s airline companies provide commercial air service in cities throughout North America with more than 3,000 daily flights carrying more than 53 million passengers annually. SkyWest Airlines operates through partnerships with United Airlines, Delta Air Lines, American Airlines and Alaska Airlines. ExpressJet Airlines operates through partnerships with United Airlines, Delta Air Lines and American Airlines. Based in St. George, Utah, SkyWest continues to set the standard for excellence across the regional industry with unmatched value for customers, shareholders and its more than 19,000 employees.

SkyWest will host its conference call to discuss first quarter 2017 results today, April 27, 2017, 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/1088/20573

This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the first quarter 2017 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 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; realization of manufacturer residual value guarantees on applicable SkyWest aircraft; 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
2017
2016
OPERATING REVENUES
Passenger
$
745,411
$
744,390
Ground handling and other
20,004
17,685
Total operating revenues
765,415
762,075
OPERATING EXPENSES
Salaries, wages and benefits
300,039
305,557
Aircraft maintenance, materials and repairs 132,325
138,859
Depreciation and amortization
70,114
67,801
Aircraft rentals
57,709
67,124
Aircraft fuel
34,310
25,332
Ground handling services
19,535
20,984
Other operating expenses
75,088
74,609
Total operating expenses
689,120
700,266
OPERATING INCOME
76,295
61,809
OTHER INCOME (EXPENSE)
Interest income
660
430
Interest expense
(24,549)
(17,725)
Total other expense, net
(23,889)
(17,295)
INCOME BEFORE INCOME TAXES
52,406
44,514
PROVISION FOR INCOME TAXES
17,620
17,422
NET INCOME
$
34,786
$
27,092
BASIC EARNINGS PER SHARE
$
0.67
$
0.53
DILUTED EARNINGS PER SHARE
$
0.65
$
0.52
Weighted average common shares
Basic
51,820
51,218
Diluted
53,202
52,014
SkyWest, Inc. and Subsidiaries
Summary of Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
March 31,
December 31,
2017
2016
Cash, restricted cash, and marketable securities $
586,455
$
564,907
Other current assets
330,131
352,885
Total current assets
$
916,586
$
917,792
Property and equipment, net
3,900,731
3,782,897
Deposit on aircraft
27,572
38,800
Other long term assets
283,467
268,477
Total assets
$
5,128,356
$
5,007,966
Current portion, long-term debt
$
293,644
$
305,460
Other current liabilities
456,864
441,805
Total current liabilities
$
750,508
$
747,265
Long-term debt, net of current maturities
2,321,271
2,240,051
Other long-term liabilities
682,762
668,840
Stockholders’ equity
1,373,815
1,351,810
Total liabilities and stockholder’s equity
$
5,128,356
$
5,007,966
Unaudited Operating Highlights
Three Months Ended
March 31
2017
2016
Change
Block hours
452,683
486,872
(7.0) %
Departures
263,862
286,475
(7.9) %
Revenue passenger miles (000)
6,256,405 6,721,216
(6.9) %
Available seat miles (000)
7,958,283 8,506,355
(6.4) %
Revenue per available seat mile $
0.096 $
0.090
6.7 %
Cost per available seat mile
$
0.090 $
0.084
7.1 %
Passengers carried
12,020,37712,668,546 (5.1) %
Passenger load factor
78.6%
79.0%
(0.4) pts
Average passenger trip length
520
531
(2.1) %
SkyWest, Inc. and Subsidiaries
Additional Operational Information (unaudited)
SkyWest’s total fleet in service decreased by 20 aircraft during Q1 2017, as follows:
Aircraft in scheduled service at December 31, 2016:
652
Additions:
New E175 aircraft added with United Airlines ("United"):
2
New E175 aircraft added with Delta Air Lines ("Delta"):
-
New E175 aircraft added with Alaska Airlines ("Alaska"):
5
Total Additions:
7
Removals:
ERJ145 aircraft removed from service with multiple partners: (22)
CRJ200 aircraft removed from service with multiple partners: (5)
Total Removals:
(27)
Aircraft in scheduled service at March 31, 2017:
632
SkyWest’s total fleet in service decreased by 24 aircraft over the last twelve months, as follows:
Aircraft in scheduled service at March 31, 2016:
656
Additions:
New E175 aircraft added with United:
19
New E175 aircraft added with Delta:
13
New E175 aircraft added with Alaska:
13
Total Additions:
45
Removals:
ERJ145 aircraft removed from service with multiple partners: (45)
CRJ200 aircraft removed from service with multiple partners: (16)
CRJ700 aircraft removed from service with multiple partners: (8)
Total Removals:
(69)
Aircraft in scheduled service at March 31, 2017:
632
SkyWest, Inc. and Subsidiaries
Additional Operational Information (continued and unaudited)
Completed Block Hours by Aircraft Type and by Airline
Three months ended March 31
By Aircraft Type:
2017
2016
Variance
%
E175s
79,927
43,114
85.4
CRJ700/900s
136,861
159,306
(14.1)
Dual-class aircraft 216,788
202,420
7.1
CRJ200s
133,275
156,758
(15.0)
ERJ145/135s
102,620
127,694
(19.6)
50-seat aircraft
235,895
284,452
(17.1)
Total Block Hours
452,683
486,872
(7.0)
Three months ended March 31
By Airline:
2017
2016
Variance
%
SkyWest Airlines
277,835
271,536
2.3
ExpressJet
174,848
215,336
(18.8)
Total Block Hours
452,683
486,872
(7.0)
Quarterly Fleet, Block Hour and ASM Production Forecast for 2017
As of
As of
As of
As of
As of
12/31/2016
3/31/2017
6/30/2017
9/30/2017
12/31/2017
Fleet (1):
(Actual)
(Actual)
(Estimate) (Estimate)
(Estimate)
E175s
86
93
103
103
104
CRJ700/900s
194
194
194
194
194
CRJ200s
213
208
197
185
178
ERJ145s/135s
159
137
126
113
100
Totals
652
632
620
595
576
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Total 2017
Production (2):
(Actual)
(Estimate)
(Estimate)
(Estimate) (Estimate)
Block Hours
452,683
463,000
464,000
434,000
1,814,000
ASMs (in billions)
8.0 b
8.3 b
9.0 b
8.5 b
33.8 b
(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.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/skywest-inc-announces-first-quarter-2017-profit-300447503.html

SOURCE SkyWest, Inc.

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