SkyWest, Inc. Announces Second Quarter 2016 Profit

ST. GEORGE, Utah, July 28, 2016 /PRNewswire/ -- SkyWest, Inc. (NASDAQ: SKYW) today reported financial and operating results for the second quarter of 2016, including net income of $40 million or $0.77 per diluted share, up from net income of $31 million or $0.61 per diluted share in Q2 2015.  Pre-tax income for the second quarter of 2016 was $66 million compared to $53 million in Q2 2015.  

Operating income was $84 million for the second quarter of 2016, compared to $70 million in Q2 2015.  The improvement in operating income was primarily due to new aircraft added to profitable flying contracts, strong and improved operating performance at SkyWest Airlines ("SkyWest Airlines") and ExpressJet Airlines ("ExpressJet") and continued economic benefit from the execution of SkyWest's fleet transition plan.

Commenting on the results, Chip Childs, SkyWest, Inc. Chief Executive Officer, said "The year-over-year improvement in our profitability reflects the value from our on-going fleet transition efforts coupled with continued strong operating performance.  We remain focused on improving our long-term fleet economics, reducing fleet risk and delivering exceptional service to our passengers and major partners.  I want to thank our 20,000 professionals for achieving an incredible 99.9% controllable completion rate during the quarter."

Q2 2016 Financial Highlights

Revenue was $801 million in Q2 2016, up $13 million from Q2 2015.  The increase in revenue included the net impact of adding 18 new E175 aircraft since Q2 2015 and economic improvements in certain existing flying arrangements, partially offset by the removal of 46 CRJ200 and ERJ145 aircraft from unprofitable or less-profitable flying agreements over the same period. 

Operating expenses were $717 million in Q2 2016, down by $1 million from Q2 2015. This improvement primarily related to lower direct operating costs from fewer aircraft in service and maintenance cost savings initiatives, offset by early aircraft lease termination costs associated with three CRJ700s that were removed from service and processed for storage during Q2 2016.

Q2 2016 Operational Update  

Flight completion rates at SkyWest Airlines and ExpressJet for Q2 2016 and Q2 2015 are summarized as follows:

SkyWest's total aircraft in service decreased by one aircraft during the second quarter of 2016 as follows:

SkyWest's total aircraft in service decreased by 21 aircraft from June 30, 2015 to June 30, 2016 as follows:

During Q2 2016, SkyWest redeployed seven CRJ700 aircraft into service under a four-year agreement with American.  SkyWest previously operated the seven CRJ700s under an agreement with another major airline partner prior to transitioning the aircraft to the American agreement.  The redeployed CRJ700s with American are consistent with SkyWest's fleet transition plan to reduce its aircraft lease commitment risk on its CRJ700 aircraft and improve SkyWest's overall long-term profitability.  In conjunction with the CRJ700s transitioned to American, SkyWest anticipates its American CRJ200s contracts currently scheduled to expire between Q4-2016 and Q1-2017 will not be extended. 

SkyWest anticipates its CRJ200 fleet will be reduced by approximately 21 aircraft and its ERJ145 fleet will be reduced by eleven aircraft by the end of 2016 as a result of scheduled flying agreement expirations.  These 21 CRJ200 aircraft are currently operating under agreements with multiple partners.  The majority of the CRJ200 aircraft and ERJ145 aircraft reduction is anticipated to coincide with scheduled aircraft lease expirations.  The quarterly block hour forecast for 2016 at the end of this release reflects the anticipated production impact from this scheduled reduction.

SkyWest also anticipates it will return 17 additional CRJ700s under an early lease return arrangement over the next twelve months.  The early lease termination cost on these 17 aircraft is estimated to be approximately $20-27 million (pre-tax) of largely non-cash expense and will be recognized as the aircraft are removed from service and processed for storage.  SkyWest estimates that Q3 and Q4 of 2016 will have approximately $10-15 million of this charge each quarter. 

The following table outlines SkyWest's anticipated delivery schedule for new E175 aircraft through the end of 2017:

Q2 2016 Capital and Liquidity Update

SkyWest had $513 million in cash and marketable securities at June 30, 2016, an increase of $70 million from March 31, 2016.  SkyWest issued $181 million in new long-term debt during Q2 2016 to finance the eight new E175s delivered during the quarter.  Total debt increased by $101 million during the second quarter from the eight new E175 aircraft net of scheduled principal payments. 

In the second quarter of 2016, SkyWest made capital investments of $43 million:  $32 million toward the purchase of eight E175 aircraft and $11 million in other capital expenditures. 

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 3,300 daily flights carrying nearly 57 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 20,000 employees.

SkyWest will host its conference call to discuss second quarter 2016 results today, July 28, at 2:30 p.m. Mountain.  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/1088/16303.  

This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the second quarter 2016 earnings call, participation at investor conferences, investor update 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 and intentions, 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; 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 the section of SkyWest's Annual Report on Form 10-K for the year ended December 31, 2015, entitled "Risk Factors."