31-Oct-2019 10:10 AM

SkyWest, Inc. Announces Third Quarter 2019 Profit

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Third Quarter Highlights:

$1.79 earnings per diluted share, up 14% from $1.57 in Q3 2018
Pre-tax income of $119 million, up from $110 million in Q3 2018; net income of $91 million, up from $83 million in Q3 2018
Five new E175 aircraft scheduled for delivery in Q4 2019 under a previously announced agreement

SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for Q3 2019, including net income of $91 million, or $1.79 per diluted share, compared to net income of $83 million, or $1.57 per diluted share, for Q3 2018. Earnings per diluted share increased 14% in Q3 2019 from Q3 2018, primarily due to SkyWest's ongoing fleet transition. SkyWest has added 13 new E175 aircraft and 11 new CRJ900 aircraft since Q3 2018 and reduced aircraft ownership costs through early lease buyouts on 52 aircraft executed in 2019.

Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said "We were pleased to deliver another solid quarter as we continue executing our fleet strategy and remain positioned for future opportunity based on strong demand for our product. I want to thank our SkyWest professionals for their excellent work during the quarter."

Financial Highlights

Revenue was $760 million in Q3 2019, down from $829 million in Q3 2018 due to the sale of

ExpressJet Airlines ("ExpressJet") in January 2019. Excluding ExpressJet revenue in Q3 2018, Q3 2019 revenue increased $71 million, primarily from adding 24 new aircraft since Q3 2018.

Operating expenses were $614 million in Q3 2019, down from $691 million in Q3 2018, also due to the sale of ExpressJet. Excluding ExpressJet operating expenses in Q3 2018, Q3 2019 operating expenses increased $62 million, primarily from growth in operations as a result of additional aircraft placed into service since Q3 2018.

Operational Update

Aircraft deliveries under previously announced deals for Delta New E175 aircraft to be financed and operated by SkyWest:

Five aircraft scheduled for delivery in Q4 2019
Six aircraft scheduled for delivery from early to mid-2020 New CRJ900 aircraft to be financed by Delta and operated by SkyWest:

One aircraft delivered in Q3 2019
One aircraft scheduled for delivery in mid-2020 Used E175 aircraft financed by Delta and operated by SkyWest:

Six aircraft scheduled for in-service dates from early to mid-2020

During Q3 2019, SkyWest acquired four CRJ900 aircraft under an early lease buyout. These four aircraft are scheduled to expire under SkyWest's flying agreement with Delta in 2020. SkyWest also anticipates removing eight CRJ700s from its flying agreement with Delta by the end of 2020. As previously announced, SkyWest has an agreement with Delta to replace these 12 used CRJ aircraft with 12 new aircraft. Following their agreement expirations, SkyWest anticipates utilizing these 12 used aircraft in various ways: placing them with other partners, using the airframe/engines as spare parts and/or leasing the airframes/engines to third parties.

Aircraft deliveries under previously announced deals for American

SkyWest is scheduled to place ten used CRJ700 aircraft with American throughout 2020 including seven used aircraft that SkyWest anticipates acquiring from a third party and three used aircraft that SkyWest expects to source through upcoming contract expirations with another SkyWest partner.

Lease agreement with a third party for 29 CRJ700 aircraft

SkyWest has placed four of 29 CRJ700 aircraft under a previously announced lease agreement with a third party for a ten-year term as of September 30, 2019. SkyWest anticipates the remaining aircraft will be placed under lease in increments through mid-2020.

Capital and Liquidity

SkyWest had $572 million in cash and marketable securities at September 30, 2019, up from $550 million at June 30, 2019. During the third quarter of 2019, SkyWest:

Used $25 million to repurchase stock under SkyWest's $250 million share repurchase program
Used $30 million to acquire four CRJ900 aircraft under an early lease buyout
Used $39 million to acquire spare engines and $33 million for other spare aircraft parts and maintenance assets

Total debt at September 30, 2019 was $3.0 billion, down from $3.1 billion as of June 30, 2019.

SkyWest, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Dollars and Shares in Thousands, Except per Share Amounts)
(Unaudited)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
OPERATING REVENUES
Flying agreements	$ 738,838	$ 816,057	$ 2,164,173	$ 2,377,659
Airport customer service and other	21,457	13,218	64,199	40,531
Total operating revenues	760,295	829,275	2,228,372	2,418,190

OPERATING EXPENSES
Salaries, wages and benefits	251,414	301,378	752,768	901,775
Aircraft maintenance, materials and repairs	133,521	142,285	376,572	423,665
Depreciation and amortization	92,795	86,088	272,929	246,386
Aircraft fuel	31,063	30,258	87,570	87,208
Airport-related expenses	27,808	25,655	89,237	80,852
Aircraft rentals	17,676	36,827	55,840	119,015
Special items	-	-	21,869	-
Other operating expenses	59,577	68,859	184,634	206,511
Total operating expenses	613,854	691,350	1,841,419	2,065,412
OPERATING INCOME	146,441	137,925	386,953	352,778
OTHER INCOME (EXPENSE)
Interest income	3,542	2,283	11,081	5,692
Interest expense	(31,606)	(31,440)	(96,884)	(86,485)
Other income, net	361	1,157	47,367	3,470
Total other expense, net	(27,703)	(28,000)	(38,436)	(77,323)

INCOME BEFORE INCOME TAXES	118,738	109,925	348,517	275,455
PROVISION FOR INCOME TAXES	27,399	26,879	80,945	62,189
NET INCOME	$ 91,339	$ 83,046	$ 267,572	$ 213,266

BASIC EARNINGS PER SHARE	$ 1.80	$ 1.60	$ 5.24	$ 4.10
DILUTED EARNINGS PER SHARE	$ 1.79	$ 1.57	$ 5.19	$ 4.03

Weighted average common shares
Basic	50,746	52,039	51,111	52,002
Diluted	51,129	52,981	51,568	52,976

SkyWest, Inc. and Subsidiaries
Summary of Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)

	September 30, 2019	December 31, 2018
Cash and marketable securities	$ 571,506	$ 689,329
Other current assets	238,883	331,465
Total current assets	810,389	1,020,794
Property and equipment, net	5,245,792	4,963,732
Deposit on aircraft	50,906	42,012
Other long-term assets	490,572	286,674
Total assets	$ 6,597,659	$ 6,313,212

Current portion, long-term debt	$ 362,582	$ 350,206
Other current liabilities	598,957	574,620
Total current liabilities	961,539	924,826

Long-term debt, net of current maturities	2,622,236	2,809,768
Other long-term liabilities	897,624	614,337
Stockholders' equity	2,116,260	1,964,281
Total liabilities and stockholders' equity	$ 6,597,659	$ 6,313,212

Unaudited Operating Highlights - SkyWest Airlines

	Three Months Ended September 30,			Nine Months Ended September 30,
	2019	2018	Change	2019	2018	Change
Block hours	375,933	355,264	5.8%	1,096,104	1,028,492	6.6%
Departures	219,272	207,074	5.9%	627,799	592,139	6.0%

Adjusted flight completion	99.9%	99.9%	0.0 pts	99.9%	99.9%	0.0 pts
Raw flight completion	98.5%	98.9%	(0.4) pts	97.8%	98.5%	(0.7) pts

Passengers carried	11,568,831	10,784,556	7.3%	32,566,966	30,101,561	8.2%
Passenger load factor	83.9%	83.0%	0.9 pts	82.3%	81.6%	0.7 pts

Average passenger trip length	501	489	2.5%	501	490	2.2%

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 increased by one aircraft during Q3 2019, as follows:

Aircraft in scheduled service at June 30, 2019:			482
Additions:
New CRJ900 aircraft:			1
Aircraft in scheduled service at September 30, 2019:			483

SkyWest's total fleet in service decreased by 91 aircraft over the last 12 months, as follows:

Aircraft in scheduled service at September 30, 2018:		574
Additions:
New E175 aircraft:	13
New CRJ900 aircraft:	11
Total new aircraft added:		24
Used aircraft transitioned back into service, net		18
SkyWest Airlines removals:
CRJ900 aircraft:		(5)
ExpressJet removals:
ERJ145 aircraft:	(100)
CRJ700 aircraft:	(28)
		(128)
Aircraft in scheduled service at September 30, 2019:		483

SkyWest, Inc. and Subsidiaries
Additional Operational Information (continued and unaudited)

Completed Block Hours by Aircraft Type

	Three months ended September 30,			Nine months ended September 30,
SkyWest Airlines:	2019	2018	Variance %	2019	2018	Variance %
E175s	135,780	120,694	12.5%	395,776	329,667	20.1%
CRJ900s	31,595	28,175	12.1%	93,988	84,588	11.1%
CRJ700s	75,612	68,621	10.2%	224,448	201,687	11.3%
CRJ200s	132,946	137,774	(3.5)%	381,892	412,550	(7.4)%
Total Block Hours	375,933	355,264	5.8%	1,096,104	1,028,492	6.6%

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)			(Actual)	(Actual)		(Estimate)
E175s	146	147			151	151		156
CRJ900s	41	43			42	43		43
CRJ700s	99	99			99	99		94
CRJ200s	184	187			190	190		190
Total SkyWest Airlines	470	476			482	483		483

	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)	(Actual)		(Actual)	(Estimate)		(Estimate)
Block Hours	351,928		349,389	370,782		375,933	369,000		1,465,000


(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 September 30, 2019, SkyWest leased four CRJ200s, four 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. 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.

This press release was sourced from SkyWest Airlines on 30-Oct-2019.