SKYW
$45.40
Skywest
($.75)
(1.63%)
Earnings Details
Quarter December 2019
Thursday, January 30, 2020 4:01:00 PM
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Summary

Skywest (SKYW) Recent Earnings

Skywest (SKYW) reported Quarter December 2019 earnings of $1.43 per share on revenue of $743.6 million. The consensus earnings estimate was $1.41 per share on revenue of $737.1 million. Revenue fell 7.5% 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
$1.41
Reported Revenue
$743.6 Mil
Revenue Estimate
$737.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SkyWest, Inc. Announces Fourth Quarter 2019 Profit

ST. GEORGE, Utah, Jan. 30, 2020 /PRNewswire/ --

Fourth Quarter Highlights:

  • $1.43 earnings per diluted share, up 12% from $1.28 in Q4 2018
  • Pre-tax income of $98 million, up from $91 million in Q4 2018; net income of $73 million, up from $67 million in Q4 2018
  • Secured new flying contract for 20 new E175 aircraft with American Airlines ("American")

SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for Q4 2019, including net income of $73 million, or $1.43 per diluted share, compared to net income of $67 million, or $1.28 per diluted share, for Q4 2018. Earnings per diluted share increased 12% in Q4 2019 from Q4 2018, primarily due to SkyWest's ongoing fleet transition. SkyWest has added ten new E175 aircraft and seven new CRJ900 aircraft since Q4 2018 and reduced aircraft ownership costs through early lease buyouts on 56 aircraft executed in 2019.

SkyWest reported net income of $340 million, or $6.62 per diluted share for the 2019 year.  Adjusted net income for the 2019 year was $321 million, or $6.25 per diluted share, excluding the gain on the sale of ExpressJet Airlines ("ExpressJet") and other special items recorded in Q1 20191.  Net income for the 2018 year was $280 million or $5.30 per diluted share.

Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said "2020 represents the start of the next phase of our fleet transition as we increase new E175 aircraft and invest in our older CRJ fleet, driven by strong demand for both aircraft types. We expect this will make 2020 a pivot year to position us for a new trajectory in 2021 and 2022."

Financial Highlights
Revenue was $744 million in Q4 2019, down from $803 million in Q4 2018 due to the sale of ExpressJet in January 2019. Excluding ExpressJet revenue in Q4 2018, Q4 2019 revenue increased $59 million, primarily from adding 17 new aircraft since Q4 2018.

Operating expenses were $618 million in Q4 2019, down from $682 million in Q4 2018, also due to the sale of ExpressJet. Excluding ExpressJet operating expenses in Q4 2018, Q4 2019 operating expenses increased $59 million, primarily from growth in operations as a result of additional aircraft placed into service since Q4 2018 and an increase in maintenance expense.

Operational Update
New flying contract with American for 20 new E175 aircraft

  • SkyWest awarded 20 aircraft under a ten-year contract, with the anticipated delivery of ten aircraft in late 2020 and ten aircraft during the first half of 2021
  • SkyWest anticipates financing the aircraft through debt
  • Financial terms of the contract were not disclosed

Aircraft deliveries under previously announced deals for Delta Air Lines ("Delta")
New E175 aircraft to be financed and operated by SkyWest:

  • Five aircraft were delivered in Q4 2019
  • Six aircraft are scheduled for delivery from early to mid-2020

Upcoming new and used aircraft to be financed by Delta and operated by SkyWest:

  • One new CRJ900 aircraft scheduled for delivery in mid-2020
  • Six used E175 aircraft scheduled for in-service dates from early to mid-2020

In conjunction with new aircraft deliveries for Delta, SkyWest anticipates removing eight CRJ700 and four CRJ900 aircraft from its flying agreement with Delta by the end of 2020. Following the respective agreement expirations, SkyWest anticipates utilizing these 12 aircraft in various ways: placing them with other partners, using the airframes/engines as spares and/or leasing the airframes/engines to third parties.

Aircraft deliveries under a previously announced deal with American
SkyWest placed two of ten used CRJ700s with American during Q4 2019. SkyWest is scheduled to place the remaining eight CRJ700 aircraft with American throughout 2020. SkyWest anticipates acquiring five used CRJ700s from a third party and internally sourcing three CRJ700s through contract expirations.

Lease agreement with a third party for 29 CRJ700 aircraft
As of December 31, 2019, SkyWest has placed ten of 29 CRJ700 aircraft under a previously announced lease agreement with a third party under a ten-year lease term. SkyWest anticipates the remaining aircraft will be placed under the lease in increments through mid-2020.

Capital and Liquidity
SkyWest had $520 million in cash and marketable securities at December 31, 2019, down from $572 million at September 30, 2019. During the fourth quarter of 2019, SkyWest:

  • Used $18 million in cash toward the purchase of five new E175 aircraft (total capital expenditure of $118 million on the acquired aircraft with $100 million of debt financing)
  • Used $39 million toward the purchase of spare engines and used airframes and $24 million for other capital investments, primarily related to spare aircraft parts
  • Used $10 million to repurchase stock under SkyWest's $250 million repurchase program

Total debt was $3.0 billion at December 31, 2019 and September 30, 2019.

Reconciliation to Adjusted Net Income and Diluted Earnings per Share (unaudited)

(Dollars in thousands, except per diluted share)












For the year ended December 31, 2019



Pre-tax income


Income tax benefit (expense)


Net income


Net income per diluted share

GAAP income


$     446,305


$   (106,206)


$      340,099


$     6.62

2019 adjustments (1)


(24,656)


5,646


(19,010)



Adjusted income


$     421,649


$   (100,560)


$      321,089


$     6.25










(1)  Excludes the gain on the sale of ExpressJet of $46.5 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.  These adjustments were recorded in Q1 2019.

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 up to 2,500 daily flights. SkyWest Airlines operates through partnerships with United Airlines, Delta Air Lines, American Airlines and Alaska Airlines to carry more than 40 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 more than 14,000 employees.

SkyWest will host its conference call to discuss fourth quarter 2019 results today, January 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/1088/32739. This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the fourth 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 the 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, the expected earnings and other results from our ongoing fleet transition, 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.

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

SkyWest, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Dollars and Shares in Thousands, Except per Share Amounts)

(Unaudited)



 

Three Months Ended

December 31,


 

Year Ended

December 31,



2019


2018


2019


2018


OPERATING REVENUES









 Flying agreements

$         725,092


$         791,862


$        2,889,265


$        3,169,520


 Airport customer service and other

18,499


11,628


82,698


52,159


 Total operating revenues

743,591


803,490


2,971,963


3,221,679











OPERATING EXPENSES









 Salaries, wages and benefits

248,978


299,744


1,001,746


1,201,518


 Aircraft maintenance, materials and repairs 

137,741


132,594


514,313


556,259


 Depreciation and amortization

95,168


88,203


368,098


334,589


 Aircraft fuel

31,546


30,449


119,115


117,657


 Airport-related expenses

29,600


28,753


118,837


109,605


 Aircraft rentals

16,158


35,929


71,998


154,945


 Special items

-


-


21,869


-


 Other operating expenses

59,095


66,315


243,729


272,826


 Total operating expenses

618,286


681,987


2,459,705


2,747,399


OPERATING INCOME

125,305


121,503


512,258


474,280


 

OTHER INCOME (EXPENSE)









 Interest income

3,051


3,131


14,131


8,823


 Interest expense

(30,871)


(33,924)


(127,755)


(120,409)


 Other income, net

304


150


47,671


3,620


 Total other expense, net

(27,516)


(30,643)


(65,953)


(107,966)











INCOME BEFORE INCOME TAXES

97,789


90,860


446,305


366,314


PROVISION FOR INCOME TAXES

25,262


23,754


106,206


85,942


NET INCOME

$          72,527


$          67,106


$         340,099


$          280,372











BASIC EARNINGS PER SHARE

$             1.44


$   1.30


$             6.68


$    5.40


DILUTED EARNINGS PER SHARE

$             1.43


$   1.28


$             6.62


$    5.30











Weighted average common shares









 Basic

50,395


51,650


50,932


51,914


 Diluted

50,796


52,556


51,375


52,871





















 

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)



December 31,

2019


December 31,

2018

Cash and marketable securities

$        520,172


$        689,329

Other current assets

240,174


331,465

Total current assets

760,346


1,020,794


Property and equipment, net

5,345,823


4,963,732

Deposit on aircraft

48,858


42,012

Other long-term assets

502,102


286,674

Total assets

$     6,657,129


$     6,313,212





Current portion, long-term debt

$        364,126


$        350,206

Other current liabilities

560,550


574,620

Total current liabilities

924,676


924,826





Long-term debt, net of current maturities

2,628,989


2,809,768

Other long-term liabilities

928,450


614,337

Stockholders' equity

2,175,014


1,964,281

Total liabilities and stockholders' equity

$     6,657,129


$     6,313,212

 

Unaudited Operating Highlights – SkyWest Airlines



Three Months Ended

December 31,


Year Ended

December 31,



2019

2018

 Change


2019

2018

 Change


Block hours

368,301

351,928

4.7%


1,464,405

1,380,420

6.1%


Departures

214,299

198,346

8.0%


842,098

790,485

6.5%











Adjusted flight completion

99.9%

99.9%

0.0 pts


99.9%

99.9%

0.0 pts


Raw flight completion

98.4%

99.0%

(0.6) pts


97.9%

98.6%

(0.7) pts











Passengers carried

11,093,800

10,200,740

8.8%


43,660,766

40,302,301

8.3%


Passenger load factor

82.2%

81.4%

0.8 pts


82.3%

81.6%

0.7 pts











Average passenger trip length

496

500

(0.8)%


500

492

1.6%


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 had no net change during Q4 2019, as follows:

 

Aircraft in scheduled service at September 30, 2019:



483


Additions:





New E175 aircraft:



5


Removals:





CRJ700 aircraft:



(5)


Aircraft in scheduled service at December 31, 2019:



483


SkyWest's total fleet in service decreased by 113 aircraft over the last 12 months, as follows:

 

Aircraft in scheduled service at December 31, 2018:



596


Additions:





New E175 aircraft:

10




New CRJ900 aircraft:

7




Total new aircraft added:



17


Used aircraft transitioned back into service, net:



1


SkyWest Airlines CRJ900s removed from service:



(5)


ExpressJet removals:





ERJ145 aircraft:

(100)




CRJ200 aircraft:

(16)




CRJ700 aircraft:

(10)







(126)


Aircraft in scheduled service at December 31, 2019:



483


 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)


Completed Block Hours by Aircraft Type



Three months ended December 31,


Year ended December 31,



SkyWest Airlines:

2019


2018


Variance %


2019


2018


Variance %


E175s

133,232


127,616


4.4%


529,008


457,285


15.7%


CRJ900s

30,872


28,080


9.9%


124,860


112,668


10.8%


CRJ700s

74,151


65,702


12.9%


298,599


267,387


11.7%


CRJ200s

130,046


130,530


(0.4)%


511,938


543,080


(5.7)%


Total Block Hours

368,301


351,928


4.7%


1,464,405


1,380,420


6.1%
















Aircraft in Scheduled Service and Block Hour Production Forecast for 2020



As of

12/31/2019


As of

3/31/2020


As of

6/30/2020


As of

9/30/2020


As of

12/31/2020





SkyWest Airlines aircraft (1):

(Actual)


(Estimate)


(Estimate)


(Estimate)


(Estimate)





E175s

156


158


163


169


178





CRJ900s

43


43


44


40


40





CRJ700s

94


94


94


94


94





CRJ200s

190


190


190


190


190





Total SkyWest Airlines

483


485


491


493


502




































Q4 2019


Q1 2020


Q2 2020


Q3 2020


Q4 2020


Total 2020


SkyWest Airlines (2):


(Actual)


(Estimate)


(Estimate)


(Estimate)


(Estimate)


(Estimate)


Block Hours


368,301


374,000


389,000


401,000


398,000


1,562,000

































(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 December 31, 2019, SkyWest leased four CRJ200s, ten CRJ700s and five CRJ900s to third parties (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.


 

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SOURCE SkyWest, Inc.