SkyWest reports $25.5m net income for 3Q10

SkyWest, Inc has reported net income of $25.5 million based on operating revenues of $686.9 million for the quarter ended 30 September 2010.

These figures compare with $28.6 million of net income and $637.7 million in operating revenues for the same period last year.

The company puts down the decrease in net income primarily to a reduction in rates paid to SkyWest Airlines and Atlantic Southeast Airlines under their respective Delta Air Lines Connection agreements which cut SkyWest’s revenue during the quarter by approximately $4.9 million (pre-tax).

Additionally, under the SkyWest Airlines and Atlantic Southeast Airlines agreements for United Express operations, SkyWest recognises revenue at a fixed hourly rate for mature engine maintenance on regional jet engines and SkyWest recognises engine maintenance expense on its CRJ200 engines on an as-incurred basis as maintenance expense. During the three months ended 30 September 2010, the CRJ200 engine expense under the United Express agreements with SkyWest Airlines and Atlantic Southeast increased by $2.1 million compared to the three months ended 30 September 2009.

During the quarter ended 30 September 2010, SkyWest incurred $9.0 million (pre-tax) in engine maintenance expenses in excess of amounts collected and recorded as revenue at the fixed hourly rate.

The increase in operating revenues, says SkyWest, was primarily due to a 5.4% increase in block hours that generated approximately $36.6 million in additional revenue (after giving effect to the aforementioned Delta rate adjustment). Other increases in revenues were due to an increase in ground handling and other revenue.

Total airline expenses (consisting of total operating and interest expenses) increased by $54.6 million, or 9.2%, during the three months ended 30 September 2010, compared with the three months ended 30 September 2009. Excluding fuel and engine overhaul costs directly reimbursed under SkyWest’s flying contracts, total airline expenses increased by $44.3 million, or 8.7%, during the three months covered, compared with the same period last year.

During the quarter, SkyWest made a $7.0 million investment in the Mekong Aviation Joint Stock Company (Air Mekong), taking 30% ownership in the company. Air Mekong started operations on 9 October 2010 using four CRJ900s flying to various destinations within Vietnam. SkyWest Airlines and Atlantic Southeast have provided significant assistance in the development of the Air Mekong venture by acquiring aircraft for operations and assisting in other commercial and corporate matters. Additionally, some of Air Mekong’s organisational leadership and pilots were previously employed by Atlantic Southeast.

At 30 September 2010, SkyWest’s fleet totalled 460 aircraft, consisting of 412 regional jets (236 assigned to Delta, 172 assigned to United, four assigned to AirTran Airways and 48 EMB-120s (36 assigned to United and 12 assigned to Delta).

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