SkyWest Announces Third Quarter 2009 Results

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...


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.

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