2014

SkyWest, Inc. Announces Second Quarter and YTD 2013 Results

ST. GEORGE, Utah, Aug. 7, 2013 /PRNewswire/ -- SkyWest, Inc. ("SkyWest") (NASDAQ: SKYW) today reported net income of $20.7 million, or $0.39 per diluted share, for the quarter ended June 30, 2013, compared to net income of $17.0 million, or $0.33 per diluted share, for the same period last year.

SkyWest also reported net income of $24.0 million, or $0.46 per diluted share, for the six months ended June 30, 2013, compared to $16.3 million, or $0.32 per diluted share, for the same period last year.

Quarter Highlights

SkyWest experienced improved financial results for the quarter ended June 30, 2013 compared to its financial results for the quarter ended June 30, 2012.  SkyWest generated additional block hour production and corresponding operating revenues (after giving effect to reduced fuel and certain engine overhaul pass through revenues) as a result of increased utilization and increasing the size of its aircraft fleet between June 30, 2013 and June 30, 2012.  Following are selected highlights from SkyWest's quarter ended June 30, 2013, compared to the quarter ended June 30, 2012:

  • Increased pretax income 17.8% to $33.7 million, compared to $28.6 million
  • Increased fully-diluted EPS 18.2% to $0.39, compared to $0.33
  • Increased block hour production 6.1% to 609,711 block hours, compared to 574,884 block hours
  • Recorded approximately $28.2 million in additional revenues (net of fuel and certain engine overhaul pass through revenues), primarily related to increased block hour production
  • Increased total aircraft fleet to 760 aircraft as of June 30, 2013, compared to 725 aircraft as of June 30, 2012

Commenting on the results, Jerry C. Atkin, SkyWest's Chairman and CEO, said "We are pleased with the progress we continue to make in producing improved operational and financial performance as compared to the same period last year."  He continued, "We will remain focused on our profit improvement objectives while continuing to deal with the ever-present challenges in the airline industry."

Financial and Operating Results

Operating revenues totaled $839.1 million for the quarter ended June 30, 2013, compared to $937.2 million for the same period last year or a decrease of $98.1 million.  The decrease was due primarily to the reduction of $117.9 million of fuel and certain engine overhaul amounts which were directly reimbursed by SkyWest's major partners and recorded as operating revenues.  However, this reduction was partially offset by recording approximately $28.2 million in additional operating revenues primarily resulting from a 6.1% increase total block hours for the quarter ended June 30, 2013, compared to the quarter ended June 30, 2012.    

Total airline expenses (consisting of total operating and interest expenses) decreased $103.7 million, or 11.4%, during the quarter ended June 30, 2013, compared to the same period in 2012.  However, after excluding pass-through costs for fuel and certain engine overhaul expenses, total airline expenses increased $14.2 million or only 1.9% which was less than the 6.1% increase in block hours produced.    

Under certain of its agreements with its major partners, SkyWest recognizes revenue at fixed hourly rates for mature engine maintenance on regional jet engines and SkyWest recognizes engine maintenance expense on its CRJ200 regional jet engines on an as-incurred basis as maintenance expense.  During the quarter ended June 30, 2013, CRJ200 engine expense under these agreements decreased $3.2 million to $10.6 million compared to $13.8 million for the quarter ended June 30, 2012, as a result of decreased engine overhaul expense due to the timing of scheduled engine maintenance events.  SkyWest was reimbursed approximately $12.8 million and $10.2 million for engine overhaul expense, under its agreements, in each of the periods ended June 30, 2013 and 2012, respectively.   

Liquidity

At June 30, 2013, SkyWest had $665.6 million in cash and marketable securities, compared to $709.4 million as of December 31, 2012.  The decrease in cash and marketable securities of $43.8 million was primarily the result of the payment of scheduled semi-annual lease and debt payments as well as making deposits on recent aircraft orders.  Cash and marketable securities increased $34.1 million during the quarter ended June 30, 2013 compared to the balance of $631.5 as of the quarter ended March 31, 2013.  SkyWest's long-term debt was $1.38 billion as of June 30, 2013, compared to $1.47 billion as of December 31, 2012.  The decrease in long-term debt for the six-months ended June 30, 2013 was due primarily to SkyWest's payment of normal recurring debt obligations.  SkyWest has significant long-term lease obligations that are recorded as operating leases and are not reflected as liabilities on SkyWest's consolidated balance sheets.  At a 4.7% discount rate, the present value of these lease obligations was approximately $1.5 billion as of June 30, 2013.

Recent Business Developments

On May 21, 2013, SkyWest announced it had entered into a Capacity Purchase Agreement ("CPA") with United Airlines, Inc. ("United") to operate 40 new Embraer E175 dual-class regional jet aircraft. The CPA is for 12 years and the aircraft will be operated by SkyWest's wholly-owned subsidiary, SkyWest Airlines, Inc. ("SkyWest Airlines"). Deliveries for these aircraft are scheduled to begin in April 2014 and continue through August 2015.  

Additionally, on May 21, 2013 SkyWest announced it reached an agreement with Embraer S.A. ("Embraer") for the purchase of 100 new E175 dual-class regional jet aircraft, 40 of which are considered firm and 60 aircraft remain conditional upon SkyWest entering into capacity purchase agreements with other major airlines. SkyWest intends to place the 40 new aircraft into service under the terms of the United CPA discussed above.   

On June 17, 2013, SkyWest and Embraer jointly announced an aircraft purchase agreement covering 100 E175-E2 dual-class regional jet aircraft and an option to purchase an additional 100 of the same aircraft.  Deliveries for these E2 aircraft are tentatively planned for 2020.

On August 2, 2012, SkyWest announced the award of 34 additional dual-class aircraft and the removal of 66 CRJ200 aircraft under its Delta Connection Agreements with Delta Airlines, Inc. ("Delta") and by end of May 2013, all 34 of these dual-class aircraft had been delivered. As of June 30, 2013 SkyWest had removed 24 (22 placed in contract with another partner; other 2 removed from fleet) of the 66 CRJ200 aircraft and currently anticipates removing another 24 CRJ200 aircraft during the months of September 2013 through December 2013.  These 24 aircraft have been financed by Delta and will be returned to Delta with no further obligation by SkyWest.  SkyWest believes the remaining 18 aircraft will be removed at various times through 2014 and early 2015.    

About SkyWest

SkyWest is the holding company for two scheduled passenger airline operations and an aircraft leasing company and is headquartered in St. George, Utah. SkyWest's scheduled passenger airline operations consist of SkyWest Airlines also based in St. George, Utah and ExpressJet Airlines, Inc. ("ExpressJet Airlines") based in Atlanta, Georgia.  SkyWest Airlines operates as United Express, Delta Connection, American Eagle and US Airways Express carriers under contractual agreements with United, Delta, American Airlines, Inc. ("American") and US Airways, Inc. ("US Airways").  SkyWest Airlines also operates flights for Alaska Airlines under a contractual agreement.  ExpressJet Airlines operates as United Express, Delta Connection, and American Eagle carriers under contractual agreements with United, Delta and American. System-wide, SkyWest serves markets in the United States, Canada, Mexico and the Caribbean with approximately 4,100 daily departures and a fleet of approximately 760 regional aircraft.  This press release and additional information regarding SkyWest can be accessed at www.skywest.com.

FORWARD-LOOKING STATEMENTS

In addition to historical information, this release contains forward-looking statements.  SkyWest may, from time to time, make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements encompass SkyWest's beliefs, expectations, hopes or intentions regarding future events.  Words such as "forecasts", "expects," "intends," "believes," "anticipates," "should," "likely" and similar expressions identify forward-looking statements.  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 Airlines, 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 other carriers to fly the E-Jets, uncertainties regarding operation of the aircraft, the ability to obtain certain regularity approvals to operate the aircraft under our operating certificates and the ability to obtaining financing for the aircraft.  

Actual operational and financial results of SkyWest, SkyWest Airlines and ExpressJet Airlines will 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 ability of ExpressJet Airlines to realize potential synergies and other anticipated financial impacts of the consolidation of its operations, the possibility that future financial and operating results of ExpressJet Airlines may not meet SkyWest's forecasts and the timing of ongoing consolidation of the operations of ExpressJet Airlines, if achieved.  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; ongoing negotiations between SkyWest, SkyWest Airlines and ExpressJet Airlines and their major partners regarding their contractual obligations; the financial stability of those major partners and any potential impact of their financial condition on the operations of  SkyWest, SkyWest Airlines, or ExpressJet Airlines; the resolution of current litigation with a major airline partner of SkyWest Airlines and ExpressJet Airlines; 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; labor relationships; the impact of global instability; rapidly fluctuating fuel costs;the degree and nature of competition; potential fuel shortages; the impact of weather-related or other natural disasters on air travel and airline costs; aircraft deliveries; and other unanticipated factors.  Risk factors, cautionary statements and other conditions which could cause SkyWest's actual results to differ from management's current expectations are contained in SkyWest's filings with the Securities and Exchange Commission; including the section of SkyWest's Annual Report on Form 10-K for the year ended December 31, 2012, entitled "Risk Factors."

 

SKYWEST, INC.
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,


2013


2012


2013


2012

OPERATING REVENUES:








      Passenger

$      826,122


$  920,633


$ 1,611,993


$ 1,822,989

      Ground handling and other

13,008


16,581


30,624


35,399

          Total operating revenues

839,130


937,214


1,642,617


1,858,388









OPERATING EXPENSES:








      Salaries, wages and benefits

300,342


290,676


597,738


581,490

      Aircraft maintenance, materials and repairs

171,528


167,150


338,684


346,786

      Aircraft fuel                       

46,802


153,544


96,483


300,994

      Aircraft rentals

81,814


83,944


164,402


168,846

      Depreciation and amortization

61,174


64,182


122,174


128,497

      Station rentals and landing fees

36,998


44,254


71,086


88,187

      Ground handling services

33,117


29,615


67,694


64,930

      Other

56,800


57,043


118,238


111,395

          Total operating expenses

788,575


890,408


1,576,499


1,791,125









OPERATING INCOME

50,555


46,806


66,118


67,263









OTHER INCOME (EXPENSE):








      Interest income

870


2,043


2,597


3,996

      Interest expense

(17,526)


(19,387)


(35,491)


(39,167)

      Other, net

(187)


(815)


5,852


(4,667)

      Total other (expense), net

(16,843)


(18,159)


(27,042)


(39,838)









INCOME BEFORE INCOME TAXES

33,712


28,647


39,076


27,425

PROVISION FOR INCOME TAXES

12,992


11,687


15,121


11,147









NET INCOME

$        20,720


$    16,960


$      23,955


$      16,278









BASIC INCOME PER SHARE

$           0.40


$        0.33


$          0.46


$          0.32

DILUTED INCOME PER SHARE

$           0.39


$        0.33


$          0.46


$          0.32









Weighted average common shares:








      Basic

51,881


50,944


51,822


50,912

      Diluted

52,547


51,789


52,522


51,335

                                                   


Unaudited Operating Highlights

Operating Highlights


Three Months Ended

June 30,

Six Months Ended

June 30,


2013

2012

 % Change

2013

2012

 % Change

Passengers carried

15,789,276

15,014,037

5.2%

29,822,450

28,380,283

5.1%

Revenue passenger miles (000)

8,274,906

7,689,573

7.6%

15,519,541

14,628,486

6.1%

Available seat miles (000)

10,065,109

9,344,407

7.7%

19,259,418

18,347,889

5.0%

Passenger load factor

82.2%

82.3%

   (0.10)pts

80.6%

79.7%

     0.90pts

Passenger breakeven load factor

79.0%

79.9%

   (0.90)pts

79.1%

78.5%

    0.60pts

Yield per revenue passenger mile

$        0.100

$       0.120

(16.7)%

$          0.104

$       0.125

(16.8)%

Revenue per available seat mile

$        0.083

$       0.100

(17.0)%

$          0.085

$       0.101

(15.8)%

Cost per available seat mile

$        0.080

$       0.097

(17.5)%

$          0.084

$       0.100

(16.0)%

Fuel cost per available seat mile

$        0.005

$       0.016

(68.8)%

$          0.005

$       0.016

(68.8)%

Average passenger trip length

524

512

2.3%

520

515

1.0%

Block hours

609,711

574,884

6.1%

1,181,702

1,131,305

4.5%

Departures

374,486

360,733

3.8%

724,738

701,873

3.3%








SOURCE SkyWest, Inc.



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