Posted on: 28 April 2016 by Mark Howells
SkyWest, Inc. has announced financial and operating results for the first quarter of 2016 (1Q16), including net income of $27 million, up from net income of $10 million in 1Q15, while pre-tax income for 1Q16 was $45 million, compared with $16 million in 1Q15.The company’s operating income was $62 million, or 8.1% in operating margin, for 1Q16, compared with $34 million in 1Q15. The improvement in operating margin, according to SkyWest, has been primarily due to new aircraft added to profitable flying contracts, economic improvements from fleet transition and certain existing flying contracts, additional financial incentives earned through improved operating performance and a reduction in the number of aircraft operating under unprofitable or less-profitable flying contracts.Commenting on the results, SkyWest, Inc. chief executive officer Chip Childs remarked, “The quarter's strong results reflect the value SkyWest has been able to generate for our partners through solid, reliable operating performance. The demand for our service and aircraft is strong and we remain focused on continuing to drive incremental improvement in fleet economics to create long-term value for our stakeholders. The quarter's performance is a huge credit to our 20,000 professionals who deliver a quality product to our passengers and major airline partners.”Revenue in 1Q16 was $762 million, up $2 million from 1Q15. The increase in revenue included the net impact of 29 aircraft added to profitable flying agreements and the removal of 66 aircraft from unprofitable or less-profitable flying agreements since 1Q15. The 1Q16 revenue also reflected rate increases under certain existing SkyWest flying contracts, additional flying under pro-rate arrangements, and higher contract performance incentives earned compared with 1Q15.Operating expenses were $700 million in 1Q16, down by $26 million from 1Q15. This improvement was primarily related to lower direct operating costs from fewer aircraft in service, a reduction in fuel costs, maintenance cost savings initiatives, partially offset by additional crew training costs in anticipation of scheduled Embraer 175 aircraft deliveries.SkyWest's total aircraft in service decreased by 37 aircraft from 31 March 2015 to 31 March 2016. Under its fleet transition plan, SkyWest generated approximately 24,000 additional block hours, or a 14% increase, with its dual-class aircraft (E175s and CRJ700s/900s) during 1Q16, compared with 1Q15’s figures. SkyWest had a reduction of approximately 54,000 block hours, or a 16% decrease, with its 50-seat and smaller aircraft (ERJ145s/135s, CRJ200s and EMB120s) during 1Q16, compared with 1Q15.SkyWest had $442 million in cash and marketable securities at 31 March 2016, a decrease of $56 million from 31 December 2015. SkyWest made $35 million in scheduled semi-annual aircraft lease pre-payments during 1Q16. The company issued $68 million in new long-term debt during 1Q16 to finance the three new E175s delivered during the quarter. Total debt, net of principal payments, increased by $11 million during the quarter.In 1Q16, SkyWest made capital investments of $30 million: $12 million in equity toward the purchase of three E175s, $5 million for a related spare engine, and $13 million in other capital expenditures.For the second quarter of 2016, SkyWest estimates capital investments of $50 million: $32 million in equity toward the purchase of eight E175s, $5 million for a related spare engine, and $13 million in other capital expenditures.