Exhibit 99.1

 

 

 

NEWS RELEASE

 

CONTACT:

Investor Relations

Corporate Communications

 

435.634.3200

435.634.3553

 

Investor.relations@skywest.com

corporate.communications@skywest.com

 

SkyWest, Inc. Announces Second Quarter 2017 Profit

 

·                  Second quarter 2017 net income of $50 million, or $0.95 per diluted share

·                  Pre-tax income up 22% from second quarter of 2016

·                  Earnings up year-over-year from fleet transition progress and solid operating performance

·                  SkyWest Airlines pilots approve pay agreement extension through mid-2022

 

ST. GEORGE, Utah, July 27, 2017 — SkyWest, Inc. (NASDAQ: SKYW) (“SkyWest”) today reported financial and operating results for the second quarter of 2017, including net income of $50 million, or $0.95 per diluted share, compared to net income of $40 million, or $0.77 per diluted share for Q2 2016. The improvement in net income over Q2 2016 was primarily due to SkyWest’s continued fleet transition, including the addition of 47 new E175s, and the removal of 51 ERJ145s and 18 CRJ200s since Q2 2016. Additionally, since Q2 2016, SkyWest transitioned 49 CRJ700s from other major airline partners to American Airlines, Inc. (“American”) under a previously announced multi-year agreement, further reducing fleet risk.

 

Commenting on the results, Chip Childs, Chief Executive Officer of SkyWest, said “Our results reflect strong production, solid operating performance and ongoing fleet transition improvements. We will continue our disciplined strategy to pursue opportunities that will further improve our business model. None of this is possible without our outstanding professionals, and I want to thank them for the work they do each day to provide an excellent product to our customers.”

 

Q2 2017 Financial Highlights

 

Revenue was $810 million in Q2 2017, up from $801 million in Q2 2016. The increase in revenue included the net impact of adding 47 new E175 aircraft since Q2 2016, partially offset by the removal of 76 unprofitable or less profitable aircraft over the same period, including 51 ERJ145s, 18 CRJ200s and seven CRJ700s.

 

1



 

Operating expenses were $703 million in Q2 2017, down from $717 million in Q2 2016. The decrease was primarily due to lower direct operating costs from 29 fewer aircraft in service and a 5% reduction in block hour production, partially offset by higher crew training costs associated with the new E175 aircraft deliveries.

 

Q2 2017 Operational Update

 

SkyWest Airlines, Inc. (“SkyWest Airlines”) took delivery of ten E175s during Q2 2017. SkyWest Airlines anticipates adding one additional E175 aircraft in Q4 2017, resulting in a total of 104 E175 aircraft by the end of 2017.

 

During Q2 2017, SkyWest Airlines and ExpressJet Airlines, Inc. (“ExpressJet”) completed the previously announced transition of 49 CRJ700s to American under a multi-year contract. The 49 CRJ700s in service with American were previously operated by SkyWest Airlines or ExpressJet with other major airline partners.

 

SkyWest Airlines pilots voted in favor of a four-year extension to their current pay agreement, with the new agreement effective July 2017 through mid-2022. The new agreement provides additional compensation for SkyWest Airlines pilots, primarily in profit sharing and 401(k) match.  The financial terms of the agreement were not disclosed.  SkyWest Airlines anticipates the new agreement will allow it to continue to provide outstanding pilot careers, meet its mainline partners’ needs and provide better visibility for long-term growth opportunities.

 

Operating Performance:

 

Flight completion rates at SkyWest Airlines and ExpressJet for Q2 2017 and Q2 2016 are summarized as follows:

 

 

 

SkyWest Airlines

 

ExpressJet

 

 

 

Q2 2017

 

Q2 2016

 

Q2 2017

 

Q2 2016

 

Adjusted Completion *

 

99.9

%

99.9

%

99.9

%

99.9

%

Raw Completion

 

98.9

%

99.1

%

97.6

%

98.2

%

 


* Adjusted Completion excludes weather cancellations. Raw Completion includes weather cancellations.

 

2



 

Q2 2017 Capital and Liquidity

 

SkyWest had $635 million in cash and marketable securities at June 30, 2017, up $70 million from December 31, 2016 and up $48 million from March 31, 2017. During the second quarter of 2017, SkyWest used $15 million in cash and $25 million in previously paid deposits toward the purchase of ten E175 aircraft. SkyWest did not repurchase any stock this quarter under its $100 million share repurchase program of which $90 million remains authorized.

 

SkyWest issued $227 million in long-term debt during Q2 2017 to finance ten E175s delivered during the quarter. Total debt increased by $145 million during the second quarter of 2017 from the new E175 aircraft acquired, net of scheduled principal payments.

 

In Q2 2017, excluding aircraft purchased, SkyWest used $21 million for other capital investments, including spare engines and aircraft parts.

 

3



 

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 3,000 daily flights carrying more than 50 million passengers annually. SkyWest Airlines operates through partnerships with United Airlines (“United”), Delta Air Lines (“Delta”), American and Alaska Airlines (“Alaska”). ExpressJet Airlines operates through partnerships with United, Delta and American. 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 18,000 employees.

 

SkyWest will host its conference call to discuss second quarter 2017 results today, July 27, 2017, 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/1088/21885.This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the second quarter 2017 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 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 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 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.

 

4



 

SkyWest, Inc. and Subsidiaries

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

 

 

 

2017

 

2016

 

2017

 

2016

 

OPERATING REVENUES

 

 

 

 

 

 

 

 

 

Passenger

 

$

791,341

 

$

784,813

 

$

1,536,752

 

$

1,529,203

 

Ground handling and other

 

18,418

 

16,525

 

38,422

 

34,211

 

Total operating revenues

 

809,759

 

801,338

 

1,575,174

 

1,563,414

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

295,929

 

304,228

 

595,969

 

609,785

 

Aircraft maintenance, materials and repairs

 

152,356

 

142,289

 

284,681

 

281,149

 

Depreciation and amortization

 

71,206

 

69,887

 

141,320

 

137,688

 

Aircraft rentals

 

55,413

 

72,567

 

113,123

 

139,691

 

Aircraft fuel

 

37,183

 

32,306

 

71,493

 

57,638

 

Ground handling services

 

15,902

 

16,743

 

35,436

 

37,727

 

Other operating expenses

 

75,174

 

79,181

 

150,262

 

153,790

 

Total operating expenses

 

703,163

 

717,201

 

1,392,284

 

1,417,468

 

OPERATING INCOME

 

106,596

 

84,137

 

182,890

 

145,946

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

Interest income

 

1,330

 

485

 

1,990

 

915

 

Interest expense

 

(27,063

)

(18,287

)

(51,612

)

(36,012

)

Total other expense, net

 

(25,733

)

(17,802

)

(49,622

)

(35,097

)

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

80,863

 

66,335

 

133,268

 

110,849

 

PROVISION FOR INCOME TAXES

 

30,386

 

26,091

 

48,005

 

43,513

 

NET INCOME

 

$

50,477

 

$

40,244

 

$

85,263

 

$

67,336

 

 

 

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE

 

$

0.98

 

$

0.78

 

$

1.65

 

$

1.31

 

DILUTED EARNINGS PER SHARE

 

$

0.95

 

$

0.77

 

$

1.61

 

$

1.29

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares

 

 

 

 

 

 

 

 

 

Basic

 

51,751

 

51,418

 

51,785

 

51,318

 

Diluted

 

52,977

 

52,194

 

53,090

 

52,104

 

 

5



 

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)

 

 

 

June 30,
2017

 

December 31,
2016

 

Cash, restricted cash, and marketable securities

 

$

634,519

 

$

564,907

 

Other current assets

 

312,490

 

352,885

 

Total current assets

 

$

947,009

 

$

917,792

 

Property and equipment, net

 

4,112,541

 

3,782,897

 

Deposit on aircraft

 

21,976

 

38,800

 

Other long term assets

 

279,087

 

268,477

 

Total assets

 

$

5,360,613

 

$

5,007,966

 

 

 

 

 

 

 

Current portion, long-term debt

 

$

306,849

 

$

305,460

 

Other current liabilities

 

472,241

 

441,805

 

Total current liabilities

 

$

779,090

 

$

747,265

 

 

 

 

 

 

 

Long-term debt, net of current maturities

 

2,452,663

 

2,240,051

 

Other long-term liabilities

 

706,318

 

669,707

 

Stockholders’ equity

 

1,422,542

 

1,350,943

 

Total liabilities and stockholders’ equity

 

$

5,360,613

 

$

5,007,966

 

 

Unaudited Operating Highlights

 

 

 

Three Months Ended
June 30

 

Six Months Ended
June 30

 

 

 

2017

 

2016

 

Change

 

2017

 

2016

 

Change

 

Block hours

 

467,100

 

493,336

 

(5.3

)%

919,783

 

980,209

 

(6.2

)%

Departures

 

280,326

 

296,454

 

(5.4

)%

544,188

 

582,929

 

(6.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Passengers carried

 

13,364,974

 

13,915,405

 

(4.0

)%

25,385,351

 

26,583,951

 

(4.5

)%

Passenger load factor

 

81.8

%

83.2

%

(1.4

)pts

80.3

%

81.1

%

(0.8

)pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average passenger trip length

 

511

 

521

 

(1.9

)%

515

 

526

 

(2.1

)%

 

6



 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)

 

SkyWest’s total fleet in service decreased by six aircraft during Q2 2017, as follows:

 

Aircraft in scheduled service at March 31, 2017:

 

 

 

632

 

Additions:

 

 

 

 

 

New E175 aircraft added with United:

 

5

 

 

 

New E175 aircraft added with Delta:

 

5

 

 

 

Total Additions:

 

 

 

10

 

Removals:

 

 

 

 

 

ERJ145 aircraft removed from service:

 

(13

)

 

 

CRJ200 aircraft removed from service:

 

(2

)

 

 

CRJ700 aircraft removed from service:

 

(1

)

 

 

Total Removals:

 

 

 

(16

)

Aircraft in scheduled service at June 30, 2017:

 

 

 

626

 

 

SkyWest’s total fleet in service decreased by 29 aircraft over the last twelve months, as follows:

 

Aircraft in scheduled service at June 30, 2016:

 

 

 

655

 

Additions:

 

 

 

 

 

New E175 aircraft added with United:

 

18

 

 

 

New E175 aircraft added with Delta:

 

18

 

 

 

New E175 aircraft added with Alaska:

 

11

 

 

 

Total Additions:

 

 

 

47

 

Removals:

 

 

 

 

 

ERJ145 aircraft removed from service:

 

(51

)

 

 

CRJ200 aircraft removed from service:

 

(18

)

 

 

CRJ700 aircraft removed from service:

 

(7

)

 

 

Total Removals:

 

 

 

(76

)

Aircraft in scheduled service at June 30 2017:

 

 

 

626

 

 

7



 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)

 

Completed Block Hours by Aircraft Type and by Airline

 

 

 

Three months ended June 30

 

Six months ended June 30

 

 

 

2017

 

2016

 

Variance
%

 

2017

 

2016

 

Variance
%

 

By Aircraft Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

E175s

 

90,051

 

50,499

 

78.3

 

169,979

 

93,613

 

81.6

 

CRJ700/900s

 

145,565

 

160,062

 

(9.1

)

282,426

 

319,368

 

(11.6

)

Dual-class aircraft

 

235,616

 

210,561

 

11.9

 

452,405

 

412,981

 

9.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRJ200s

 

137,477

 

160,271

 

(14.2

)

270,751

 

317,029

 

(14.6

)

ERJ145/135s

 

94,007

 

122,504

 

(23.3

)

196,627

 

250,199

 

(21.4

)

50-seat aircraft

 

231,484

 

282,775

 

(18.1

)

467,378

 

567,228

 

(17.6

)

Total Block Hours

 

467,100

 

493,336

 

(5.3

)

919,783

 

980,209

 

(6.2

)

 

 

 

Three months ended June 30

 

Six months ended June 30

 

 

 

2017

 

2016

 

Variance
%

 

2017

 

2016

 

Variance
%

 

By Airline:

 

 

 

 

 

 

 

 

 

 

 

 

 

SkyWest Airlines

 

303,921

 

281,622

 

7.9

 

581,756

 

553,158

 

5.2

 

ExpressJet

 

163,179

 

211,714

 

(22.9

)

338,027

 

427,051

 

(20.8

)

Total Block Hours

 

467,100

 

493,336

 

(5.3

)

919,783

 

980,209

 

(6.2

)

 

Quarterly Fleet, Block Hour and ASM Production Forecast for 2017

 

 

 

As of
12/31/2016

 

As of
3/31/2017

 

As of
6/30/2017

 

As of
9/30/2017

 

As of
12/31/2017

 

 

 

(Actual)

 

(Actual)

 

(Actual)

 

(Estimate)

 

(Estimate)

 

Fleet (1):

 

 

 

 

 

 

 

 

 

 

 

E175s

 

86

 

93

 

103

 

103

 

104

 

CRJ700/900s

 

194

 

194

 

193

 

195

 

193

 

CRJ200s

 

213

 

208

 

206

 

188

 

195

 

ERJ145s/135s

 

159

 

137

 

124

 

119

 

100

 

Totals

 

652

 

632

 

626

 

605

 

592

 

 

 

 

Q1-2017

 

Q2-2017

 

Q3-2017

 

Q4-2017

 

Total 2017

 

 

 

(Actual)

 

(Actual)

 

(Estimate)

 

(Estimate)

 

(Estimate)

 

Production (2):

 

 

 

 

 

 

 

 

 

 

 

Block Hours

 

452,683

 

467,100

 

469,000

 

445,000

 

1,834,000

 

ASMs (in billions)

 

8.0

 

8.3

 

8.5

 

8.3

 

33.1

 

 


(1) Fleet count excludes aircraft removed from scheduled service. Actual fleet counts may vary from the forecast due to timing of aircraft removed from service, timing of aircraft transitioned into service and timing of new aircraft deliveries.

 

(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.

 

8


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