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SkyWest, Inc. Announces Fourth Quarter 2015 and Full Year Profit



Published:

ST. GEORGE, Utah, Feb. 4, 2016 /PRNewswire/ -- SkyWest, Inc. (NASDAQ: SKYW) today reported financial and operating results for the fourth quarter of 2015, including adjusted net income of $25 million or $0.49 per diluted share, up from adjusted net income of $15.7 million or $0.31 per diluted share in 2014.  GAAP net income for the quarter was $40 million, or $0.78 per diluted share, compared to a loss of $28 million or $(0.54) per diluted share for the same quarter of 2014. 

Adjusted net income for the full year 2015 was $103 million, or $1.98 per diluted share, up from adjusted net income of $7 million, or $0.14 per diluted share, in 2014.  GAAP net income for the full year 2015 was $118 million, or $2.27 per diluted share, compared to a net loss of $24 million or $(0.47) per share for 2014.

The GAAP results for the fourth quarter 2015 include two special items totaling $25 million in pre-tax income:  a net gain of $33 million from the early extinguishment of debt and $8 million revenue reduction from the resolution of a flying contract matter.  Both of these special items are excluded from the calculation of SkyWest's adjusted net income for the quarter. 

Commenting on the results, Chip Childs, SkyWest, Inc. Chief Executive Officer said, "Our fourth quarter results reflect continued progress in the optimization of our fleet and flying contract mix.  By the end of 2017, we anticipate over 50% of our fleet will be dual class aircraft, compared to 38% today.  We are scheduled to more than double the number of E175 aircraft operating in our fleet by mid-2017.  We believe our operating performance continues to create additional opportunities to improve our business model."

Q4 2015 Financial Highlights
Operating margin increased to 7.9% in Q4 2015 compared to 6.2% in Q4 2014 on an adjusted basis.  The improvement in operating income and operating margin was primarily due to additional flying contracts with improved profitability, improved operating performance and a reduction in the number of aircraft operating under unprofitable or less profitable flying contracts.

SkyWest generated $141 million in cash from operations in Q4 2015, compared to $99 million in Q4 2014. For the 2015 year, cash from operations was $455 million, compared to $285 million in 2014.

Although adjusted revenues decreased $53 million in Q4 2015 from Q4 2014, the net reduction to revenue reflected the removal of over 100 aircraft that were operated under unprofitable flying agreements, or 16% of the December 2014 fleet.  The revenue impact of removing unprofitable aircraft from SkyWest's fleet was partially offset by additional Embraer dual-class jet aircraft ("E175") operations, improved contract rates from renewals of SkyWest's existing flying contracts and additional contract performance incentives earned compared to Q4 2014. 

Excluding special items, operating expenses were down by $63 million, or 8.3%, compared to Q4 2014. This reduction primarily related to a reduction in direct operating costs from fewer aircraft in service and reduced fuel costs, and was partially offset by additional crew training costs in anticipation of upcoming E175 aircraft deliveries.

Q4 2015 Operational Update
Changes in flight completion rates at SkyWest Airlines, Inc. ("SkyWest Airlines") and ExpressJet Airlines, Inc. ("ExpressJet") from Q4 2014 to Q4 2015 are summarized as follows:

 

   

SkyWest Airlines

 

ExpressJet

   

Q4 2015

Q4 2014

 

Q4 2015

Q4 2014

Adjusted Completion *

 

99.8%

99.2%

 

99.9%

99.7%

Raw Completion

 

98.4%

97.1%

 

98.0%

98.5%

 

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

 

SkyWest's total aircraft in service at December 31, 2015 was 660, a net decrease of 57 aircraft from December 31, 2014, summarized as follows:

 

Changes to Operating Fleet During 2015 Year

Aircraft available for scheduled service at December 2014:

 

717

New E175 aircraft with United Airlines ("United"):

20

 

New E175 aircraft with Alaska Airlines ("Alaska"):

5

 

New ERJ145 aircraft with American Airlines ("American"):

16

 

New CRJ200 aircraft with Delta Airlines ("Delta"):

5

 

Total Additions:

 

46

 

EMB120 aircraft from multiple partners:

(27)

 

ERJ145 aircraft from United:

(54)

 

CRJ200 aircraft from multiple partners:

(22)

 

Total Removals:

 

(103)

Aircraft available for scheduled service at December 2015:

 

660

 

SkyWest's total aircraft in service increased by 4 net aircraft from September 30, 2015 to December 31, 2015 as follows:

 

Changes to Operating Fleet During Q4 2015

Aircraft available for scheduled service at September 2015:

 

656

 

New E175 aircraft with Alaska:

2

 
 

CRJ200 aircraft redeployed with multiple partners:

5

 
 

Total Additions:

 

7

       
 

ERJ145 aircraft removed from United:

 

(3)

Aircraft available for scheduled service at December 2015:

 

660

         

 

Under its fleet transition plan, SkyWest generated approximately 25,000 additional block hours, or 14%, with its dual class aircraft (CRJ700s/900s and E175s) during Q4 2015, compared to Q4 2014.  SkyWest had a reduction of approximately 84,000 block hours (22%) with its less profitable 50-seat and smaller aircraft (CRJ200s, ERJ145s/135s and EMB120s) during Q4 2015, compared to Q4 2014. 

The following table outlines SkyWest's anticipated delivery schedule for new E175 aircraft through June 2017:

 

 

E175 Aircraft Scheduled Deliveries

 
 

December

2015

1H 2016

2H 2016

1H 2017

Anticipated June 2017

United

40

7

7

11

65

Alaska

5

4

6

-

15

Delta

-

-

13

6

19

Total E175 aircraft:

45

11

26

17

99

 

Q4 2015 Capital and Liquidity Update
SkyWest had $498 million in cash and marketable securities at December 31, 2015, a decrease of $70 million from September 30, 2015.  SkyWest made capital investments of $8 million during Q4 2015 to acquire two E175 aircraft and used $94 million in cash to extinguish $128 million in debt. SkyWest issued $46 million in new long-term debt during Q4 2015 to finance the 2 new E175s delivered during the quarter.  SkyWest anticipates using approximately $44 million in cash towards the purchase of additional E175 aircraft and related spare parts and spare engines scheduled for delivery in the first half of 2016.  

Q4 2015 Special Items

  • During Q4 2015 SkyWest used $94 million in cash to extinguish $128 million in higher-rate junior notes in our capital structure. This generated a net gain of $33 million for the quarter.
  • During Q4 2015 SkyWest resolved a contract matter for $8 million reflected as contra-revenue in the reported numbers.
  • The $25 million net gain represented by these two items, while included in GAAP income, is excluded from adjusted net income for the quarter as reported herein.

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 and twelve-month periods ended December 31, 2015 and 2014.  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

(dollars in thousands except EPS)

 
 

 

Three months ended December 31, 2015

 
               

Net Income per Diluted Share

 
   

Pre-tax income

 

Income tax

 

Net Income

   

GAAP income

 

$                   65,760

 

$      (25,306)

 

$          40,454

 

$            0.78

 

 Adjusted for:

                   

 Q4 2015 Adjustments (1)

 

(24,731)

 

9,517

 

(15,214)

 

$          (0.29)

 

Non-GAAP income

 

$                   41,029

 

$      (15,789)

 

$          25,240

 

$            0.49

 
                     
 

 

Three months ended December 31, 2014

 
               

Net Income per Diluted Share

 
   

Pre-tax income

 

Income tax

 

Net Income

   

GAAP income (loss)

 

$                (36,511)

 

$           8,644

 

$        (27,867)

 

$          (0.54)

 

 Adjusted for:

                   

 Special items for fleet reduction (2)

 

$                   69,977

 

$      (26,381)

 

43,596

 

0.85

 

Non-GAAP income

 

$                   33,466

 

$      (17,737)

 

$          15,729

 

$           0.31

 
                     
 

 

Year ended December 31, 2015

 
               

Net Income per Diluted Share

 
   

Pre-tax income

 

Income tax

 

Net Income

   

GAAP income

 

$                194,322

 

$      (76,505)

 

$        117,817

 

$           2.27

 

 Adjusted for:

                   

 Q4 2015 Adjustments (1)

 

$                (24,731)

 

$           9,517

 

(15,214)

 

(0.29)

 

Non-GAAP income

 

$                169,591

 

$      (66,988)

 

$        102,603

 

$           1.98

 
                     
 

 

Year ended December 31, 2014

 
               

Net Income per Diluted Share

 
   

Pre-tax income

 

Income tax

 

Net Income

   

GAAP income (loss)

 

$                (16,343)

 

$         (7,811)

 

$        (24,154)

 

$         (0.47)

 

 Adjusted for:

                   

  Gain on Sale of Equity Investment (3)

 

$                (24,922)

 

$           9,470

 

$        (15,452)

       

  Special items for fleet reduction (2)

 

74,777

 

(28,415)

 

46,362

       

 Total Adjustments

 

$                   49,855

 

$      (18,945)

 

$          30,910

 

$           0.61

 

Non-GAAP income

 

$                   33,512

 

$      (26,756)

 

$            6,756

 

$           0.14

 
                     

(1) Adjusts for a gain from early debt payoff of approximately $32.6 million, partially offset by a resolution of contract matter with a major partner of approximately $7.9 million reflected as a reduction to revenue. This adjustment allows investors to better understand and analyze our recurring core performance in the periods presented.

 
                     

(2) Adjusts for costs resulting from the removal of a specific aircraft from our operations.  This adjustment better allows investors to understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.

 
                     

(3) Adjusts for the gain from the sale of our equity investment in TRIP Linhas Aereas.  This adjustment allows investors to better understand and analyze our recurring core performance in the periods presented. 

 
 
   

 

Reconciliation to Adjusted Operating Income 

 

(dollars in thousands)

 
       

 Three months ended December 31, 

 
       

2015

 

2014

 

GAAP revenue

   

$  752,743

 

$  813,855

 

Q4 2015 Adjustments (1)

 

7,860

 

-

 

Adjusted revenue

   

$  760,603

 

$  813,855

 
               

GAAP operating expenses

 

$  700,532

 

$  833,555

 

Q4 2014 Special items (2)

 

-

 

(69,977)

 

Adjusted operating expenses

 

$  700,532

 

$  763,578

 
               
               

GAAP operating income (loss)

 

$    52,211

 

$  (19,700)

 

Adjusted operating income

 

60,071

 

50,277

 
               

GAAP operating income (loss) margin (deficit)

6.9%

 

-2.4%

 

Adjusted operating income margin

 

7.9%

 

6.2%

 
               

(1) Adjusts for a resolution of a contract matter with a major partner.  This adjustment allows investors to better understand and analyze our recurring core performance in the periods presented.

 

 
               

(2) Adjusts for costs resulting from the removal of a specific aircraft from our operations.  This adjustment better allows investors to understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.

 
   
 

 

About SkyWest
SkyWest was named on Forbes 'America's Best Employers 2015' list and was Air Transport World's Regional Airline of the Year in 2014. SkyWest is the holding company for two scheduled passenger airline operations and an aircraft leasing company and is headquartered in St. George, Utah. SkyWest's airline companies provide commercial air service in cities across the United States, Canada, Mexico and the Caribbean with more than 3,300 scheduled daily flights. SkyWest Airlines operates through partnerships with United, Delta, US Airways, American and Alaska Airlines. ExpressJet operates through partnerships with United, Delta and American. SkyWest continues to set the standard for excellence in the regional airline industry with unmatched value for customers, shareholders and its nearly 20,000 employees. This press release and additional information regarding SkyWest can be accessed at http://inc.skywest.com.

FORWARD-LOOKING STATEMENTS
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 "forecasts", "expects," "intends," "believes," "anticipates," "estimates", "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.  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 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 ability of ExpressJet to realize potential synergies and other anticipated financial impacts of the consolidation of its operations, the possibility that future financial and operating results of ExpressJet may not meet SkyWest's forecasts and the timing of ongoing consolidation of the operations of ExpressJet, if achieved; 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; labor relationships; 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; 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 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 for the year ended December 31, 2014, entitled "Risk Factors."

 

SkyWest, Inc.

Condensed Consolidated Statements of Income (Loss)

(Dollars and Shares in Thousands, Except per Share Amounts)

(Unaudited)

 
 

Three Months Ended

December 31

 

Twelve Months Ended

December 31,

 

2015

2014

 

2015

2014

 

OPERATING REVENUES:

           

      Passenger

$      736,938

$      795,946

 

$  3,030,023

$ 3,168,000

 

      Ground handling and other

15,805

17,909

 

65,539

69,447

 

          Total operating revenues

752,743

813,855

 

3,095,562

3,237,447

 
             

OPERATING EXPENSES:

           

      Salaries, wages and benefits

297,261

313,902

 

1,203,312

1,258,155

 

      Aircraft maintenance, materials and repairs

142,891

172,868

 

604,863

682,773

 

      Aircraft rentals

66,837

72,652

 

273,695

305,334

 

      Depreciation and amortization

67,554

67,253

 

264,507

259,642

 

      Aircraft fuel

27,870

38,828

 

118,124

193,247

 

      Ground handling services

19,713

23,471

 

82,694

123,917

 

      Special items

-

69,977

 

-

74,777

 

      Other operating expenses

78,406

74,604

 

313,852

314,754

 

          Total operating expenses

700,532

833,555

 

2,861,047

3,212,599

 

OPERATING INCOME (LOSS)

52,211

(19,700)

 

234,515

24,848

 
             

OTHER INCOME (EXPENSE):

           

      Interest income

350

488

 

1,997

4,096

 

      Interest expense

(19,391)

(17,299)

 

(75,850)

(65,995)

 

      Other, net

32,590

    ___- 

 

33,660

20,708

 

      Total other expense, net

13,549

(16,811)

 

(40,193)

(41,191)

 
             

INCOME (LOSS) BEFORE INCOME TAXES

65,760

(36,511)

 

194,322

(16,343)

 

PROVISION (BENEFIT) FOR INCOME TAXES

25,306

(8,644)

 

76,505

7,811

 

NET INCOME (LOSS)

$      40,454

$      (27,867)

 

$  117,817

$      (24,154)

 
             

BASIC EARNINGS (LOSS) PER SHARE

$          0.80

$          (0.54)

 

$         2.31

$        (0.47)

 

DILUTED EARNINGS (LOSS) PER SHARE

$          0.78

$          (0.54)

 

$         2.27

$         (0.47)

 
             

Weighted average common shares:

           

      Basic

50,880

51,174

 

51,077

51,237

 

      Diluted

51,657

51,174

 

51,825

51,237

 
             
               

 

SkyWest, Inc.

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)

 
 

December 31, 2015

 

December 31, 2014

Cash, restricted cash, and marketable securities

$   497,919

 

$       559,130

Other current assets

519,651

 

530,371

Total current assets

$ 1,017,570

 

$    1,089,501

Property and equipment, net

3,432,597

 

2,981,188

Deposit on aircraft

38,150

 

40,000

Other long term assets

314,569

 

299,239

Total assets

$ 4,802,886

 

$    4,409,928

       

Current liabilities

$   751,386

 

$       684,355

Long-term liabilities

2,545,065

 

2,325,227

Stockholders' equity

1,506,435

 

1,400,346

Total liabilities and stockholder's equity

$4,802,886

 

$    4,409,928

 

Unaudited Operating Highlights

 
 

Three Months Ended

December 31

 

Twelve Months Ended

December 31

 

2015

2014

 Change

 

2015

2014

 Change

 

Passengers carried

13,614,945

14,339,705

(5.1) %

 

56,228,593

58,962,010

(4.6) %

 

Revenue passenger miles (000)

7,231,965

7,715,787

(6.3) %

 

29,671,911

31,499,397

(5.8) %

 

Available seat miles (000)

8,768,088

9,452,653

(7.2) %

 

35,902,503

38,220,150

(6.1) %

 

Block hours

500,445

559,143

(10.5) %

 

2,074,809

2,275,562

(8.8) %

 

Departures

293,467

327,835

(10.5) %

 

1,226,897

1,357,454

(9.6) %

 

Passenger load factor

82.5%

81.6%

 0.90 pts

 

82.6%

82.4%

0.20 pts

 

Yield per revenue passenger mile

$      0.102

$      0.103

(1.0) %

 

$      0.102

$      0.101

1.0 %

 

Revenue per available seat mile

$      0.086

$      0.086

   NC

 

$      0.086

$      0.085

1.2 %

 

Cost per available seat mile

$      0.082

$      0.090

(8.9) %

 

$      0.082

$      0.086

(4.7) %

 

Fuel cost per available seat mile

$      0.003

$      0.004

(25.0) %

 

$      0.003

$      0.005

(40.0) %

 

Average passenger trip length

531

538

(1.3) %

 

528

534

(1.1)%

 
                 
                 
                   

 

 

Aircraft in Scheduled Service for 2015

 
 

50 seats

 

65-76 seats

 

EMB120

 

Total

 
                 

Aircraft in schedule: December 31, 2014

467

 

223

 

27

 

717

 

65-76 seat additions (United and Alaska)

-

 

25

 

-

 

25

 

50 seat additions (Delta and American)

21

 

-

 

-

 

21

 

50 seat reductions (multiple partners)

(76)

 

-

 

-

 

(76)

 

Turbo prop reductions (multiple partners)

-

 

-

 

(27)

 

(27)

 

Aircraft in schedule: December 31, 2015

412

 

248

 

-

 

660

 
 

Aircraft counts above exclude aircraft removed from scheduled service.

 

Completed Block Hours by Aircraft Type for 2015

 

Q4-2015

 

Q4-2014

 

% Change

 

FY 2015

 

FY 2014

 

% Change

CRJ200

154,819

 

172,403

 

(10.2) %

 

659,358

 

719,938

 

(8.4) %

CRJ700/900s

164,275

 

165,789

 

(0.9) %

 

654,364

 

665,133

 

(1.6) %

ERJ145/135

140,525

 

188,419

 

(25.4) %

 

622,650

 

774,171

 

(19.6) %

E175

40,821

 

14,316

 

185.1 %

 

126,108

 

23,076

 

446.5%

EMB120

-

 

18,216

 

(100.0) %

 

12,324

 

93,244

 

(86.8) %

 

500,440

 

559,143

 

(10.5) %

 

2,074,804

 

2,275,562

 

(8.8) %

                       
   

Completed Block Hours by Airline for 2015

                       
 

Q4-2015

 

Q4-2014

 

Variance

 

FY 2015

 

FY 2014

 

Variance

SkyWest Airlines

271,068

 

265,389

 

2.1 %

 

1,074,809

 

1,060,149

 

1.4 %

ExpressJet

229,372

 

293,754

 

(21.9) %

 

999,995

 

1,215,413

 

(17.7) %

 

500,440

 

559,143

 

(10.5) %

 

2,074,804

 

2,275,562

 

(8.8) %

 

Quarterly Fleet, Block Hour and ASM Production Forecast for 2016

 
 

As of

March 31, 2016

 

As of

June 30, 2016

 

As of

Sept. 30, 2016

 

As of

Dec. 31, 2016

   

Fleet Summary

(Estimate)

 

(Estimate)

 

(Estimate)

 

(Estimate)

   

Regional Jets:

                 

50 seat RJs

395

 

385

 

381

 

372

   

65-76 seat CRJs

197

 

195

 

190

 

183

   

76 seat E175s

47

 

52

 

63

 

77

   
                   

Totals

639

 

632

 

634

 

632

   
                   
 

Q1 16

 

Q2 16

 

Q3 16

 

Q4 16

 

Totals

 

(Estimate)

 

(Estimate)

 

(Estimate)

 

(Estimate)

 

(Estimate)

Block hours

ASMs

480,000

8.3b

 

481,000

8.3b

 

487,000

8.3b

 

474,000

7.7b

 

1,922,000

32.6b

 

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