SkyWest releases second quarter results

SkyWest Airlines, corporate offices, St. George, Utah, July 13, 2015 | Photo by Brett Barrett, St. George News

ST. GEORGE –  SkyWest, NASDAQ: SKYW, Thursday reported financial and operating results for the quarter ended June 30.

SkyWest generated $31.5 million of net income for its second quarter 2015, or $0.61 per diluted share.  This represents an improvement of $46.2 million from 2Q 2014, which had a net loss of $(14.7) million, or $(0.29) per diluted share.  Operating income for 2Q 2015 was $70 million, which represents SkyWest’s best quarterly operating income since 2008.

SkyWest reported $41 million of net income for the first half of 2015, or $0.79 per diluted share, a $79 million improvement compared to the first half of 2014 which had a net loss of $(38) million, or $(0.73) per diluted share.

Second quarter 2015 financial highlights

  • Pretax income increased $58 million in 2Q 2015 from 2Q 2014, primarily due to improved operating performance, additional flying contracts with improved profitability and a reduction in the number of aircraft operating under unprofitable flying contracts
  • SkyWest generated $135 million in EBITDA in 2Q 2015, compared to $77 million in 2Q 2014; for the first half of 2015 EBITDA was $234 million, compared to $112 million for the first half of 2014
  • Revenue included improvements of $32 million from the additional E175 operations, improved contract rates from renewals of SkyWest’s existing flying contracts and improved contract performance incentives compared to 2Q 2014. Revenue also improved from 2Q 2014 by $11 million from higher flight completion rates. These improvements provided a significant offset to the revenue decrease from a reduced fleet size and less scheduled production for a net decrease in revenue of $28 million year over year.
  • Operating expenses were down by $85 million compared to 2Q 2014, primarily driven by operating efficiencies from improved completion rates, a net decrease in production, maintenance cost initiatives and a reduction in fuel costs

 Second quarter 2015 operational update

  • Excluding weather cancellations, the adjusted flight completion rate for ExpressJet Airlines Inc. improved to 99.8 percent in 2Q 2015 from 99 percent in 2Q 2014; The adjusted flight completion rate for SkyWest Airlines Inc. also improved to 99.2 percent in 2Q 2015 from 99 percent in 2Q 2014
  • Including weather cancellations, ExpressJet’s raw flight completion rate was 97.5 percent in 2Q 2015 compared to 95.3 percent in 2Q 2014; SkyWest Airlines’ raw flight completion rate improved to 98.4 percent in 2Q 2015 compared to 97.4 percent in 2Q 2014
  • Total aircraft in service went to 676 at June 30, 2015, from 693 at March 31, 2015, summarized as follows:
    • Added six new E175 aircraft with United Air Lines Inc.
    • Added three new E175 aircraft with Alaska Air Group
    • Added ten used ERJ145 aircraft with American Airlines, Inc.
    • Removed 24 ERJ145/ERJ135 aircraft from service
    • Removed twelve EMB120 turboprop aircraft from service
  • Under its fleet transition, SkyWest generated approximately 24,000 additional block hours with its dual class aircraft (CRJ700s/900s and E175s) compared to Q2 2014.  SkyWest also had a reduction of approximately 72,000 block hours with its 50-seat and smaller sized aircraft (CRJ200s, ERJ145s/135s and EMB120s) compared to Q2 2014;  the total aircraft in service decreased to 676 at June 30 from 752 at June 30, 2014
  • Under an agreement announced in 2Q 2015, SkyWest Airlines will place eight additional E175 aircraft into service with Alaska Airlines, for a total of 15 E175s with Alaska Airlines.  SkyWest Airlines is scheduled to take delivery of the remaining twelve new E175 aircraft for Alaska Airlines between its fourth quarter 2015 and 4Q 2016
  • Under a previously announced agreement, SkyWest Airlines is scheduled to take delivery of five new E175 aircraft for United during its third quarter 2015

Commenting on the results, SkyWest Inc. President Chip Childs said:

Our second quarter results reflect meaningful progress in our action plans to secure profitable flying contracts, remove unprofitable aircraft and provide solid operating performance.  These actions are the primary drivers for the strong earnings momentum we are generating.  We remain committed to disciplined deployment of capital and resources as we continue the process of optimizing our fleet size and mix.

Second quarter 2015 capital and liquidity update 

  • SkyWest had $505 million in cash and marketable securities at June 30, an increase of $24 million from March; SkyWest made capital investments of $40 million during the quarter to acquire nine E175 aircraft including spare parts and engines
  • SkyWest repurchased 1.25 million shares of its common stock for $18.7 million in cash during 2Q 2015
  • The company issued $229 million in new long-term debt to finance spare engines and the nine new E175s delivered during the quarter
  • SkyWest anticipates using approximately $30 million in cash as investments in E175 aircraft scheduled for delivery in 3Q and its fourth quarter 2015

Reconciliation of non-GAAP financial measures

Although SkyWest’s financial statements are prepared in accordance with accounting principles generally accepted in the U.S., or GAAP, SkyWest management believes that certain non-GAAP financial measures may provide investors with useful information regarding the underlying business trends and performance of SkyWest’s ongoing operations and may be useful for period-over-period comparisons of such operations.

The following table sets forth supplemental financial data and corresponding reconciliations to GAAP financial statements for the three and six month periods ended June 30 and 2014 (dollars in thousands).  Readers should consider this non-GAAP measure in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP.  This non-GAAP financial measure excludes some, but not all, items that may affect SkyWest’s net income.  Additionally, this calculation may not be comparable with similarly titled measures of other companies.

Three months ended

Six months ended

June 30,

June, 30

2015

2014

2015

2014

Operating income (loss)

$   69,932

$  13,244

$ 104,008

$  (14,530)

Add: Depreciation and amortization expense

64,659

64,252

130,350

126,567

EBITDA

$ 134,591

$ 77,496

$ 234,358

$ 112,037

About SkyWest

SkyWest was named on Forbes ‘America’s Best Employers 2015’ list and was Air Transport World’s Regional Airline of the Year in 2014. SkyWest Inc. is the holding company for two scheduled passenger airline operations and an aircraft leasing company and is headquartered in St. George. SkyWest’s airline companies provide commercial air service in cities across the United States, Canada, Mexico and the Caribbean with more than 3,500 scheduled daily flights. SkyWest Airlines operates through partnerships with United, Delta, US Airways, American and Alaska Airlines. ExpressJet operates through partnerships with United, Delta and American. SkyWest continues to set the standard for excellence in the regional airline industry with unmatched value for customers, shareholders and its nearly 20,000 employees. 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,” “estimates”, “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, 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 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 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 ability of ExpressJet 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 may not meet SkyWest’s forecasts and the timing of ongoing consolidation of the operations of ExpressJet, 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; 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; 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; 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 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, 2014, entitled “Risk Factors.”

 

SKYWEST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

(Unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

OPERATING REVENUES:

      Passenger

$      773,107

$      800,548

$  1,515,605

$ 1,556,187

      Ground handling and other

15,310

16,026

33,210

32,773

          Total operating revenues

788,417

816,574

1,548,815

1,588,960

OPERATING EXPENSES:

      Salaries, wages and benefits

298,573

310,844

601,418

628,486

      Aircraft maintenance, materials and repairs                           

156,319

171,722

314,576

349,984

      Aircraft rentals

68,442

79,449

138,854

159,783

      Depreciation and amortization

64,659

64,252

130,350

126,567

      Aircraft fuel

31,192

58,018

58,492

105,243

      Ground handling services

20,117

32,314

44,089

69,332

      Special charges

4,713

4,713

      Other operating expenses

79,183

82,018

157,028

159,382

          Total operating expenses

718,485

803,330

1,444,807

1,603,490

OPERATING INCOME (LOSS)

69,932

13,244

104,008

(14,530)

OTHER INCOME (EXPENSE):

      Interest income

697

511

1,336

1,060

      Interest expense

(18,081)

(16,138)

(36,546)

(31,814)

      Other, net

(2,618)

(2,891)

      Total other expense, net

(17,384)

(18,245)

(35,210)

(33,645)

INCOME (LOSS) BEFORE INCOME TAXES

52,548

(5,001)

68,798

(48,175)

PROVISION (BENEFIT) FOR INCOME TAXES

21,073

9,736

27,703

(10,551)

NET INCOME (LOSS)

$    31,475

$     (14,737)

$    41,095

$    (37,624)

BASIC EARNINGS (LOSS) PER SHARE

$         0.61

$         (0.29)

$         0.80

$        (0.73)

DILUTED EARNINGS (LOSS) PER SHARE

$         0.61

$         (0.29)

$         0.79

$        (0.73)

Weighted average common shares:

      Basic

51,357

51,183

51,407

51,310

      Diluted

51,971

51,183

52,182

51,310

 

SKYWEST, INC.

SUMMARY OF CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

June 30,
2015

December 31,
2014

Cash, restricted cash, and marketable securities

$    504,799

$       559,130

Other current assets

826,286

731,873

Total current assets

$ 1,331,085

$    1,291,003


Property and equipment, net

3,367,704

2,981,188

Deposit on aircraft

37,700

40,000

Other long term assets

102,065

97,737

Total assets

$ 4,838,554

$    4,409,928

Current liabilities

$    744,718

$       684,355

Long-term liabilities

2,670,623

2,325,227

Stockholders’ equity

1,423,213

1,400,346

Total liabilities and stockholder’s equity

$ 4,838,554

$    4,409,928

  

 Unaudited Operating Highlights

Operating Highlights

Three Months Ended

June 30,

Six Months Ended

June 30,

2015

2014

 % Change

2015

2014

 % Change

Passengers carried

14,665,756

15,358,722

(4.5)%

27,856,293

28,992,137

(3.9)%

Revenue passenger miles (000)

7,718,342

8,165,616

(5.5)%

14,686,253

15,441,216

(4.9)%

Available seat miles (000)

9,176,581

9,736,819

(5.8)%

17,868,698

18,729,769

(4.6)%

Block hours

531,373

579,072

(8.2)%

1,048,147

1,125,885

(6.9)%

Departures

314,086

349,022

(10.0)%

618,685

674,346

(8.3)%

Passenger load factor

84.1%

83.9%

.20 pts

82.2%

82.4%

(.20) pts

Yield per revenue passenger mile

$      0.100

$        0.098

2.0%

$       0.103

$       0.101

2.0%

Revenue per available seat mile

$      0.086

$        0.084

2.4%

$       0.087

$       0.085

2.4%

Cost per available seat mile

$      0.080

$        0.084

(4.8)%

$       0.083

$       0.087

(4.6)%

Fuel cost per available seat mile

$      0.003

$        0.006

(50.0)%

$       0.003

$       0.006

(50.0)%

Average passenger trip length

526

532

(1.1)%

527

533

(1.1)%

 

2015 Quarterly Fleet, Block Hour and ASM Production

As of

March 31, 2015

As of

June 30, 2015

As of

Sept. 30, 2015

As of

Dec. 31, 2015

Fleet Summary

(Actual)

(Actual)

(Estimate)

(Estimate)

Regional Jets:

50-37 seats

449

435

416

391

65-76 seat CRJs

203

203

203

203

76 seat E175s

29

38

43

44

681

676

662

638

Turbo props:

30 seats

12

Totals

693

676

662

638

Q1 15

Q2 15

Q3 15

Q4 15

Totals

(Actual)

(Actual)

(Estimate)

(Estimate)

(Estimate)

Block hours

516,774

531,373

520,000

494,000

2,062,000

ASMs

8.7b

9.2b

9.2b

8.7b

35.8b

Aircraft in Scheduled Service

50 seats

65-76 seats

EMB120s

Total

Aircraft in schedule – December 31, 2014

467

223

27

717

  65-76 seat additions (United and Alaska)

18

18

  50 seat additions (Delta and American)

21

21

  50 seat reductions (United)

(53)

(53)

  Turbo prop reductions (Delta and United)

(27)

(27)

Aircraft in schedule – June 30, 2015

435

241

676

Aircraft counts above exclude aircraft removed from scheduled service.

 

Completed Block Hours by Aircraft type

Q2-2015

Q2-2014

Variance

YTD June 2015

YTD June 2014

Variance

CRJ200

171,337

184,841

(13,504)

337,284

359,763

(22,479)

CRJ700/900s

165,188

168,305

(3,117)

324,218

328,079

(3,861)

ERJ145/135

165,163

198,953

(33,790)

326,988

384,894

(57,906)

E175

28,333

999

27,334

47,333

999

46,334

EMB120

1,352

25,974

(24,622)

12,324

52,150

(39,826)

531,373

579,072

(47,699)

1,048,147

1,125,885

(77,738)

Completed Block Hours by Airline

Q2-2015

Q2-2014

Variance

YTD June 2015

YTD June 2014

Variance

SkyWest Airlines

270,271

265,762

4,509

525,667

518,184

7,483

ExpressJet

261,102

313,310

(52,208)

522,480

607,701

(85,221)

531,373

579,072

(47,699)

1,048,147

1,125,885

(77,738)

 

Ed. note: This report is generated by SkyWest, Inc. via PR Newswire and is not the product of St. George News (that is, SaintGeorgeUtah.com LLC, its agents, representatives and affiliates). St. George News has not undertaken to verify or comment upon any material in this report and does not assure any disposition or tax impacts associated with any financial investments related to the companies and securities that are subject of this report. Those considering investments are advised to consult with their own professionals and to proceed at their own risk.

Resources

  • SkyWest Investor Relations contacts: Telephone 435-634-3220 | Fax 435-634-3205
  • SkyWest website

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Twitter: @STGnews

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