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, 2019. ExpressJet 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
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/skywest-inc-announces-first-quarter-2019-profit-300838670.html
SOURCE SkyWest, Inc.