ST. GEORGE, Utah, Nov. 5 /PRNewswire-FirstCall/ -- SkyWest, Inc. ("SkyWest") (Nasdaq: SKYW) today reported operating revenues of $637.8 million for the quarter ended September 30, 2009, compared to $934.1 million for the same period last year. SkyWest also reported net income of $28.6 million or $0.50 per diluted share, for the quarter ended September 30, 2009, compared to $26.2 million of net income or $0.45 per diluted share, for the same period last year.
SkyWest also reported operating revenues of $2.0 billion for the nine months ended September 30, 2009, compared to $2.75 billion for the same period last year. SkyWest reported net income of $64.2 million or $1.13 per diluted share, for the nine months ended September 30, 2009, compared to $91.7 million of net income, or $1.55 per diluted share for the same period last year.
Following are the significant items effecting SkyWest's financial and operating performance during the quarter ended September 30, 2009:
Total operating revenues for the third quarter of 2009 decreased $296.4 million primarily as a result of a reduction in fuel cost reimbursements paid by SkyWest's major partners. SkyWest is reimbursed by its major partners for fuel and certain other costs under its contract flying arrangements. For financial reporting purposes, these reimbursements are recorded as operating revenues. As SkyWest's major partners have increased the amount of fuel they purchase for SkyWest's operations, SkyWest's fuel purchases (and the corresponding reimbursements and revenues from SkyWest's major partners) have declined. The reduction in operating revenues was partially offset during the third quarter of 2009 as SkyWest experienced an increase in block hours of 3.2%, compared to the same quarter of 2008. SkyWest produced 359,573 block hours for the quarter ended September 30, 2009, compared to 348,522 block hours for the same period last year.
Total operating expense and interest per available seat mile ("ASM") for the third quarter of 2009, excluding fuel expense of $61.8 million or $0.010 per ASM, decreased 4.3% to $0.090 from $0.094 for the comparable quarter of 2008. The decrease was due primarily to the reduction in customer service labor as well as other labor-related costs, principally as a result of SkyWest's major partners now providing certain customer service functions. The decrease was also partially attributable to flying more regional jets, with larger seating capacity, that typically generate more ASMs than smaller aircraft flying the same routes. SkyWest's operating subsidiaries (ASA and SkyWest Airlines) continue to incur significant non-reimbursable maintenance costs as a result of the general aging of their fleets. SkyWest expended an additional $5.5 million as a result of these costs, however these additional costs were partially offset by the reduction in customer service labor and other labor-related costs mentioned above. Total operating expense and interest, excluding fuel expense, was $533.8 million for the quarter ended September 30, 2009, compared to $534.0 million for the quarter ended September 30, 2008.
SkyWest recorded stock-based compensation expense of approximately $1.7 million ($1.1 million after-tax) for the quarter ended September 30, 2009, compared to $2.6 million ($1.6 million after tax) for the same quarter of 2008.
During the quarter ended September 30, 2009, SkyWest repurchased 93,545 shares of its common stock, at an average cost of $10.46 per share and a total cost of approximately $978,000, under stock buyback programs previously authorized by its Board of Directors. As of September 30, 2009, SkyWest had authorization to repurchase up to an additional 2.78 million shares of its common stock. SkyWest may continue to purchase shares of its outstanding stock under the authorized stock buyback program from time to time, as it deems appropriate.
At September 30, 2009, SkyWest had approximately $814.9 million in cash and marketable securities, compared to $705.2 million as of December 31, 2008. SkyWest's long-term debt was $1.71 billion as of September 30, 2009, compared to $1.68 billion as of December 31, 2008. The increase in SkyWest's long-term debt was primarily the result of acquiring three new CRJ700 regional jet aircraft that were financed with long-term debt, partially offset by SkyWest's payment of normal recurring debt obligations. SkyWest has significant long-term lease obligations that are recorded as operating leases and are not reflected as liabilities on SkyWest's consolidated balance sheets. At a 6.2% discount rate, the present value of these lease obligations was approximately $2.0 billion as of September 30, 2009.
At September 30, 2009, SkyWest's fleet totaled 446 aircraft, consisting of 392 regional jets (246 assigned to Delta Air Lines, Inc. ("Delta"), 133 assigned to United Air Lines, Inc. ("United"), ten assigned to Midwest Airlines, Inc. ("Midwest") and three operated by SkyWest), 51 EMB-120 aircraft (40 assigned to United and 11 assigned to Delta) and three ATR-72 aircraft which are no longer in revenue service.
SkyWest's Annual Report on Form 10-K for the year December 31, 2008 describes SkyWest's maintenance expense policy for its CRJ200 regional jet aircraft engines. Generally, SkyWest collects revenue at a fixed hourly rate for mature engine maintenance under two of its capacity purchase agreements (United and Midwest). During the quarter ended September 30, 2009, SkyWest incurred $7.7 million pretax expense in related engine maintenance costs in excess of amounts collected and recorded as revenue.
SkyWest has previously announced that ASA and SkyWest Airlines filed a lawsuit in Georgia state court against Delta regarding Delta's withholding of amounts related to payments that are reimbursable to SkyWest in connection with certain irregular operations ("IROP") under its existing agreements with Delta. As of September 30, 2009, SkyWest had recognized a cumulative total of $32.4 million of revenue associated with this matter for which Delta has withheld payment. SkyWest is vigorously pursuing its claim for such amounts to the extent permitted under various motions between the parties and the matter is ongoing.
On October 16, 2009, SkyWest Airlines entered into a series of transactions with United that provide operational funding to United, extending SkyWest Airlines' existing rights to operate 40 regional jet aircraft under the existing United Express Agreement and create an opportunity for ASA to operate 13 regional jet aircraft as a United Express carrier. SkyWest anticipates that ASA will begin operating as a United Express carrier starting in the first quarter of 2010, and the 13 United Express regional jets to be flown by ASA will be in operation by May of 2010. SkyWest also anticipates that ASA will operate these aircraft under a capacity purchase agreement that is generally consistent with the existing SkyWest Airlines United Express Agreement. Also, SkyWest Airlines entered an agreement with United to provide a secured term loan in the amount of $80 million. The term loan bears interest at a rate of 11% with a ten-year amortization period. The loan is secured by certain ground equipment and airport slot rights held by United. SkyWest Airlines also agreed to defer certain amounts otherwise payable to SkyWest Airlines under its existing United Express Agreement. The maximum deferral amount is $49 million and any amounts deferred accrue a deferral fee of 8% annually, with deferral fees paid weekly.
Subsequent to September 30, 2009, SkyWest Airlines entered into a code share agreement with AirTran Airways, Inc. Under the terms of the code share agreement, SkyWest Airlines will operate five CRJ200s under a pro-rate arrangement with two aircraft scheduled to begin service in December 2009 and three aircraft scheduled to begin service in early 2010. The code sharing agreement has a three year term; however, after May 15, 2010, either party may terminate the agreement upon 120 days written notice.
SkyWest Airlines, based in St. George, Utah, and ASA, based in Atlanta, Georgia, are wholly-owned subsidiaries of SkyWest. SkyWest Airlines operates as United Express, Delta Connection and Midwest Connect carriers under contractual agreements with United, Delta and Midwest respectively. ASA operates as a Delta Connection carrier under a contractual agreement with Delta. System-wide, SkyWest serves a total of approximately 207 cities in the United States, Canada, Mexico and the Caribbean, with approximately 2,355 daily departures. This press release and additional information regarding SkyWest can be accessed at www.skywest.com.
In addition to historical information, this release contains forward-looking statements. SkyWest may, from time-to-time, make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements encompass SkyWest's beliefs, expectations, hopes or intentions regarding future events. Words such as "expects," "intends," "believes," "anticipates," "should," "likely" and similar expressions identify forward-looking statements. 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. Actual results will vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of reasons, including, among others: 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; ongoing negotiations between SkyWest and its major partners regarding their contractual relationships; the financial stability of SkyWest's major partners regarding any impact on the contracts that SkyWest operates under in their behalf; variations in market and economic conditions; the impact of global instability; rapidly fluctuating fuel costs; the degree and nature of competition; potential fuel shortages; the impact of weather-related or other natural disasters on air travel and airline costs; aircraft deliveries; and other unanticipated factors. Risk factors, cautionary statements and other conditions which could cause actual results to differ from management's current expectations are contained in SkyWest's filings with the Securities and Exchange Commission, including the section of SkyWest's Annual Report on Form 10-K, entitled "Risk Factors."
SKYWEST, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars and Shares in Thousands, Except per Share Amounts) (Unaudited) Three Months Ended Nine months Ended September 30, September 30, 2009 2008 2009 2008 -------- -------- -------- -------- OPERATING REVENUES: Passenger $629,955 $926,193 $1,985,978 $2,728,922 Ground handling and other 7,793 7,919 23,235 24,033 -------- -------- -------- -------- Total operating revenues 637,748 934,112 2,009,213 2,752,955 -------- -------- -------- --------- OPERATING EXPENSES: Aircraft fuel 61,842 363,735 331,513 1,022,590 Salaries, wages and benefits 175,552 182,103 526,286 548,675 Aircraft maintenance, materials and repairs 119,055 99,294 327,604 280,662 Aircraft rentals 76,189 74,318 224,929 221,638 Depreciation and amortization 55,461 55,141 164,722 164,687 Station rentals and landing fees 27,500 33,923 90,352 102,149 Ground handling services 23,538 25,107 72,109 83,994 Other, net 35,358 40,232 107,852 127,127 -------- -------- -------- -------- Total operating expenses 574,495 873,853 1,845,367 2,551,522 -------- -------- -------- -------- OPERATING INCOME 63,253 60,259 163,846 201,433 -------- -------- -------- -------- OTHER INCOME (EXPENSE): Interest income 1,841 4,627 7,287 16,398 Interest expense (21,149) (23,872) (65,216) (80,389) Impairment of marketable securities - - (7,115) - Other, net 1,582 - 1,378 6,308 -------- -------- -------- -------- Total other (expense), net (17,726) (19,245) (63,666) (57,683) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 45,527 41,014 100,180 143,750 PROVISION FOR INCOME TAXES 16,961 14,858 36,022 52,019 -------- -------- -------- -------- NET INCOME $28,566 $26,156 $64,158 $91,731 ======== ======== ======== ======== BASIC EARNINGS PER SHARE $0.51 $0.46 $1.15 $1.58 DILUTED EARNINGS PER SHARE $0.50 $0.45 $1.13 $1.55 Weighted average common shares: Basic 55,605 57,027 55,936 58,139 Diluted 56,652 57,682 56,879 59,014 Unaudited Operating Highlights Operating Three Months Ended Nine months Ended Highlights September 30, September 30, % % 2009 2008 Change 2009 2008 Change --------- --------- ------ --------- --------- ------ Passengers carried 9,477,672 8,738,704 8.5 25,996,245 25,609,770 1.5 Revenue passenger miles (000) 4,835,887 4,435,755 9.0 13,160,338 13,126,547 0.3 Available seat miles (000) 5,945,686 5,629,121 5.6 16,663,270 16,925,658 (1.6) Passenger load factor 81.3% 78.8% 2.5pts 79.0% 77.6% 1.4pts Passenger breakeven load factor 75.9% 75.7% .2pts 5.1% 74.2% .9pts Yield per revenue passenger mile $0.130 $0.209 (37.8) $0.151 $0.208 (27.4) Revenue per available seat mile $0.107 $0.166 (35.5) $0.121 $0.163 (25.8) Cost per available seat mile $0.100 $0.159 (37.1) $0.115 $0.155 (25.8) Fuel cost per available seat mile $0.010 $0.065 (84.6) $0.020 $0.060 (66.7) Average passenger trip length 510 508 .4 506 513 (1.4) Block hours 359,573 348,522 3.2 1,027,483 1,055,884 (2.7) Departures 230,823 225,253 2.5 657,308 668,939 (1.7)SOURCE SkyWest, Inc.
