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 Third Quarter 2017 Profit

 

·                  Third quarter 2017 net income of $54 million, or $1.01 per diluted share

·                  Profitability improvement continued under on-going fleet transition

·                  Announcement during Q3 2017 for 45 new aircraft anticipated to provide growth into 2019

 

ST. GEORGE, Utah, October 25, 2017 — SkyWest, Inc. (NASDAQ: SKYW) (“SkyWest”) today reported financial and operating results for Q3 2017, including net income of $54 million, or $1.01 per diluted share, compared to net income of $41 million, or $0.79 per diluted share for Q3 2016. The Q3 2016 results included early lease return costs of $9 million, representing a reduction of $0.11 in diluted earnings (previously reported).  The Q3 2017 diluted earnings per share increased 28 percent from Q3 2016, or 12 percent after adjusting for the early lease charges included in the Q3 2016 results.  The improvement in net income over Q3 2016 was primarily due to SkyWest’s continued fleet transition, including the addition of 37 new E175s, and the removal of 50 ERJ145s/135s and 22 CRJ200s since Q3 2016.

 

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. Additionally, our teams did a great job of managing severe weather events during the quarter. None of this is possible without our outstanding professionals and the work they do each day to provide an excellent product to our customers.”

 

Q3 2017 Financial Highlights

 

Revenue was $832 million in Q3 2017, up from $800 million in Q3 2016. The increase in revenue included the net impact of adding 37 new E175 aircraft since Q3 2016, partially offset by the removal of 75 unprofitable or less profitable aircraft over the same period, including 50 ERJ145s/135s, 22 CRJ200s and three net CRJ700s/900s.

 

1



 

Operating expenses were $720 million in Q3 2017, up from $714 million in Q3 2016. The slight increase in operating expense was primarily due to higher fuel costs and an increase in engine maintenance costs as an increasing percentage of our fleet are under long term power-by-the-hour maintenance agreements.

 

Q3 2017 Operational Update

 

In Q3 2017, SkyWest Airlines, Inc. (“SkyWest Airlines”) announced the order of 30 new E175 SC aircraft to be placed under contract with Delta Air Lines (“Delta”) and 15 new E175 aircraft to be placed under contract with Alaska Airlines (“Alaska”).  SkyWest Airlines took delivery of one E175 aircraft during Q3 2017. SkyWest Airlines anticipates adding three new E175 aircraft in Q4 2017 and 42 new E175/E175 SC aircraft in 2018.  The anticipated delivery dates for the 42 E175/E175 SC aircraft are heavily weighted from mid-2018 to the end of 2018.  We expect to have a total of 149 E-175 aircraft in our fleet by the end of 2018.

 

During Q3 2017, ExpressJet Airlines, Inc. (“ExpressJet”) announced a five-year extension to its ERJ145 flying contract with United Airlines (“United”) effective January 1, 2018.  Financial terms of the agreement were not disclosed.

 

ExpressJet also initiated the wind down of its remaining dual-class flying agreement with Delta during Q3 2017.  As of September 30, 2017, ExpressJet operated 57 CRJ700s/900s under its Delta flying agreement.  Of the 57 aircraft, ExpressJet anticipates returning 27 leased aircraft to Delta over the next several quarters and removing 30 CRJ700 aircraft from service with Delta from mid-2018 to the end of 2018.  ExpressJet is pursuing placement of the 30 CRJ700 aircraft with other partners, of which eight aircraft are scheduled to be placed under an agreement with American Airlines (“American”) following the removal from service with Delta.

 

Operating Performance:

 

Flight completion rates at SkyWest Airlines and ExpressJet for Q3 2017 and Q3 2016 are summarized as follows:

 

 

 

SkyWest Airlines

 

ExpressJet

 

 

 

Q3 2017

 

Q3 2016

 

Q3 2017

 

Q3 2016

 

Adjusted Completion *

 

99.9

%

99.9

%

99.9

%

99.8

%

Raw Completion

 

98.9

%

99.4

%

95.3

%

96.7

%

 


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

 

2



 

Q3 2017 Capital and Liquidity

 

SkyWest had $675 million in cash and marketable securities at September 30, 2017, up $110 million from December 31, 2016 and up $40 million from June 30, 2017. During the third quarter of 2017, SkyWest used $52 million in cash towards aircraft deposits and the purchase of one E175 aircraft. SkyWest did not repurchase any stock this quarter under its $100 million share repurchase program of which $90 million remains authorized.

 

Total debt decreased by $75 million during the third quarter of 2017, primarily from scheduled principal payments. In Q3 2017, excluding aircraft purchased, SkyWest used $30 million for other capital investments, including spare engines and aircraft parts.

 

Reconciliation of Non-GAAP financial measures

 

Although SkyWest’s financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“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 months ended September 30, 2016 (previously reported).  SkyWest did not have a comparable adjustment for the three months ended September 30, 2017.  Readers should consider these non-GAAP measures in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP.  These non-GAAP financial measures exclude some, but not all, items that may affect SkyWest’s net income.  Additionally, these calculations may not be comparable with similarly titled measures of other companies.

 

Reconciliation to Adjusted Net Income and Diluted Earnings per Share (unaudited)

(Dollars in thousands, except per diluted share)

 

 

 

Three months ended September 30, 2016

 

 

 

Pre-tax income

 

Income tax

 

Net Income

 

Net Income per

Diluted Share

 

GAAP income

 

$

66,560

 

$

(25,238

)

$

41,322

 

$

0.79

 

Q3 2016 Adjustments (1)

 

9,223

 

(3,497

)

5,726

 

$

0.11

 

Non-GAAP income

 

$

75,783

 

$

(28,735

)

$

47,048

 

$

0.90

 

 


(1) Adjusts for early lease return charges on six CRJ700s of approximately $9.2 million. This adjustment allows investors to better understand and analyze our recurring core performance in the period presented.

 

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 nearly 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 Airlines (“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 17,000 employees.

 

SkyWest will host its conference call to discuss third quarter 2017 results today, October 25, 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/1088/22930.  This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the third 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
September 30

 

Nine Months Ended
September 30

 

 

 

2017

 

2016

 

2017

 

2016

 

OPERATING REVENUES

 

 

 

 

 

 

 

 

 

Passenger

 

$

812,295

 

$

781,475

 

$

2,349,047

 

$

2,310,678

 

Ground handling and other

 

19,641

 

18,301

 

58,063

 

52,512

 

Total operating revenues

 

831,936

 

799,776

 

2,407,110

 

2,363,190

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

303,997

 

305,958

 

899,966

 

915,743

 

Aircraft maintenance, materials and repairs

 

148,787

 

143,573

 

433,467

 

424,722

 

Depreciation and amortization

 

74,095

 

71,743

 

215,415

 

209,431

 

Aircraft rentals

 

54,976

 

65,766

 

168,098

 

205,458

 

Aircraft fuel

 

42,071

 

33,189

 

113,564

 

90,827

 

Ground handling services

 

16,693

 

16,498

 

52,130

 

54,225

 

Other operating expenses

 

78,948

 

77,215

 

229,211

 

231,004

 

Total operating expenses

 

719,567

 

713,942

 

2,111,851

 

2,131,410

 

OPERATING INCOME

 

112,369

 

85,834

 

295,259

 

231,780

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

Interest income and other

 

1,408

 

591

 

3,398

 

1,506

 

Interest expense

 

(27,101

)

(19,865

)

(78,713

)

(55,876

)

Total other expense, net

 

(25,693

)

(19,274

)

(75,315

)

(54,370

)

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

86,676

 

66,560

 

219,944

 

177,410

 

PROVISION FOR INCOME TAXES

 

32,960

 

25,238

 

80,966

 

68,751

 

NET INCOME

 

$

53,716

 

$

41,322

 

$

138,978

 

$

108,659

 

 

 

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE

 

$

1.04

 

$

0.80

 

$

2.68

 

$

2.11

 

DILUTED EARNINGS PER SHARE

 

$

1.01

 

$

0.79

 

$

2.62

 

$

2.08

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares

 

 

 

 

 

 

 

 

 

Basic

 

51,833

 

51,627

 

51,801

 

51,421

 

Diluted

 

53,080

 

52,471

 

53,087

 

52,224

 

 

5



 

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)

 

 

 

September 30,
2017

 

December 31,
2016

 

Cash, restricted cash, and marketable securities

 

$

675,443

 

$

564,907

 

Other current assets

 

318,689

 

352,885

 

Total current assets

 

$

994,132

 

$

917,792

 

 

 

 

 

 

 

Property and equipment, net

 

4,093,264

 

3,782,897

 

Deposit on aircraft

 

49,000

 

38,800

 

Other long term assets

 

253,050

 

268,477

 

Total assets

 

$

5,389,446

 

$

5,007,966

 

 

 

 

 

 

 

Current portion, long-term debt

 

$

303,423

 

$

305,460

 

Other current liabilities

 

495,711

 

441,805

 

Total current liabilities

 

$

799,134

 

$

747,265

 

 

 

 

 

 

 

Long-term debt, net of current maturities

 

2,380,792

 

2,240,051

 

Other long-term liabilities

 

733,805

 

669,707

 

Stockholders’ equity

 

1,475,715

 

1,350,943

 

Total liabilities and stockholders’ equity

 

$

5,389,446

 

$

5,007,966

 

 

Unaudited Operating Highlights

 

 

 

Three Months Ended
September 30

 

Nine Months Ended
September 30

 

 

 

2017

 

2016

 

Change

 

2017

 

2016

 

Change

 

Block hours

 

469,901

 

493,547

 

(4.8

)%

1,389,684

 

1,473,756

 

(5.7

)%

Departures

 

281,921

 

296,962

 

(5.1

)%

826,109

 

879,891

 

(6.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Passengers carried

 

13,475,674

 

14,028,703

 

(3.9

)%

38,861,025

 

40,612,654

 

(4.3

)%

Passenger load factor

 

80.0

%

83.4

%

(2.6

)pts

80.2

%

81.9

%

(1.7

)pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average passenger trip length

 

503

 

517

 

(1.7

)%

511

 

523

 

(2.3

)%

 

6



 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)

 

SkyWest’s total fleet in service decreased by 22 aircraft during Q3 2017, as follows:

 

Aircraft in scheduled service at June 30, 2017:

 

 

 

626

 

Additions:

 

 

 

 

 

New E175 aircraft:

 

 

 

1

 

Removals, net:

 

 

 

 

 

ERJ145/135 aircraft:

 

(6

)

 

 

CRJ200 aircraft:

 

(15

)

 

 

CRJ900 aircraft:

 

(4

)

 

 

Total Removals, net:

 

 

 

(25

)

Temporary placement of used CRJ700 aircraft:

 

 

 

2

 

Aircraft in scheduled service at September 30, 2017:

 

 

 

604

 

 

SkyWest’s total fleet in service decreased by 38 aircraft over the last twelve months, as follows:

 

Aircraft in scheduled service at September 30, 2016:

 

 

 

642

 

Additions:

 

 

 

 

 

New E175 aircraft:

 

 

 

37

 

Removals, net:

 

 

 

 

 

ERJ145/135 aircraft:

 

(50

)

 

 

CRJ200 aircraft:

 

(22

)

 

 

CRJ900 aircraft:

 

(4

)

 

 

Total Removals, net:

 

 

 

(76

)

Temporary placement of used CRJ700 aircraft:

 

 

 

1

 

Aircraft in scheduled service at September 30, 2017:

 

 

 

604

 

 

7



 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)

 

Completed Block Hours by Aircraft Type and by Airline

 

 

 

Three months ended September 30

 

Nine months ended September 30

 

By Aircraft Type:

 

2017

 

2016

 

Variance

%

 

2017

 

2016

 

Variance

%

 

E175s

 

99,069

 

57,760

 

71.5

 

269,048

 

151,373

 

77.7

 

CRJ700/900s

 

150,334

 

151,659

 

(0.9

)

432,760

 

471,026

 

(8.1

)

Dual-class aircraft

 

249,403

 

209,419

 

19.1

 

701,808

 

622,399

 

12.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRJ200s

 

136,898

 

159,492

 

(14.2

)

407,649

 

476,521

 

(14.5

)

ERJ145/135s

 

83,600

 

124,636

 

(32.9

)

280,227

 

374,836

 

(25.2

)

50-seat aircraft

 

220,498

 

284,128

 

(22.4

)

687,876

 

851,357

 

(19.2

)

Total Block Hours

 

469,901

 

493,547

 

(4.8

)

1,389,684

 

1,473,756

 

(5.7

)

 

 

 

Three months ended September 30

 

Nine months ended September 30

 

By Airline:

 

2017

 

2016

 

Variance
%

 

2017

 

2016

 

Variance
%

 

SkyWest Airlines

 

326,608

 

282,287

 

15.7

 

908,364

 

835,445

 

8.7

 

ExpressJet

 

143,293

 

211,260

 

(32.2

)

481,320

 

638,311

 

(24.6

)

Total Block Hours

 

469,901

 

493,547

 

(4.8

)

1,389,684

 

1,473,756

 

(5.7

)

 

Quarterly Fleet and Block Hour Production Forecast for 2017

 

Fleet (1):

 

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)

 

(Actual)

 

(Estimate)

 

E175s

 

86

 

93

 

103

 

104

 

107

 

CRJ700/900s

 

194

 

194

 

193

 

191

 

181

 

CRJ200s

 

213

 

208

 

206

 

191

 

196

 

ERJ145s/135s

 

159

 

137

 

124

 

118

 

108

 

Totals

 

652

 

632

 

626

 

604

 

592

 

 

Production (2):

 

Q1-2017

 

Q2-2017

 

Q3-2017

 

Q4-2017

 

Total 2017

 

 

 

(Actual)

 

(Actual)

 

(Actual)

 

(Estimate)

 

(Estimate)

 

Block Hours

 

452,683

 

467,100

 

469,901

 

444,000

 

1,834,000

 

 


(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. SkyWest has discontinued providing ASM forecasts, as ASMs is not a meaningful metric in SkyWest’s capacity purchase agreements.

 

8


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