SkyWest Results

SkyWest, Inc. Reports Fourth Quarter and Full Year 2016 Results

- Fourth quarter 2016 GAAP net loss of $270 million, or $5.22 loss per share - Fourth quarter 2016 adjusted net income of $29 million, or $0.54 earnings per diluted share - Full year 2016 GAAP net loss of $162 million, or $3.14 loss per share - Full year 2016 adjusted net income of $143 million, or $2.73 earnings per diluted share

SkyWest

SkyWest, Inc. (NASDAQ:  SKYW) last week reported financial and operating results for the fourth quarter of 2016, including a net loss of $270 million, or $5.22 loss per share, compared to net income of $41 million, or $0.78 earnings per diluted share for Q4 2015. Adjusted net income for Q4 2016 was $29 million, or $0.54 earnings per diluted share, compared to adjusted net income of $25 million, or $0.49 earnings per diluted share for Q4 2015. The adjusted results for Q4 2016 exclude (pre-tax) a $466 million non-cash impairment charge and $7 million of early lease return charges, both previously announced. The improvement in adjusted net income was primarily due to SkyWest's continued execution on its ongoing fleet transition and strong operating performance. 

Net loss for the 2016 year was $162 million, or $3.14 loss per share, compared to net income of $118 million, or $2.27 earnings per diluted share for the 2015 year. Adjusted net income was $143 million, or $2.73 earnings per diluted share, for the 2016 year, compared to adjusted net income of $103 million, or $1.98 earnings per diluted share, for the 2015 year. 

Commenting on the results, Chip Childs, SkyWest, Inc. Chief Executive Officer, said, "Our improved 2016 results were largely due to the addition, removal or redeployment of over 125 aircraft across our base fleet of 652 aircraft. The evolution of our fleet continues to reduce our risk, improve our capital flexibility and ensure we adapt to our major partners' long and short-term needs. Our ability to execute these significant transitions is only possible with the exceptional work of the 19,000 professionals across our organizations." 

The Q4 2016 results included a previously-announced non-cash impairment charge of $466 million (pre-tax) on SkyWest's 50-seat aircraft and related long-lived assets and spare aircraft parts. This non-cash impairment charge was net of the $90 million that SkyWest received from Bombardier during Q4 2016 in connection with the early settlement of Bombardier's residual aircraft guarantees on certain CRJ200 aircraft. The required sale of each aircraft and the cost to SkyWest of returning the aircraft to mid-time condition were points of risk and uncertainty for SkyWest that the early settlement eliminates. Schedule reductions in 50-seat aircraft for 2017 and a reduced market value on 50-seat aircraft and related assets were additional factors in the impairment charge. 

Q4 2016 Financial Highlights

Revenue was $758 million in Q4 2016, up $5 million from Q4 2015. The increase in revenue included the net impact of adding 41 new E175 aircraft since Q4 2015 (of which 19 were delivered in Q4 2016) and economic improvements from SkyWest's fleet transition, partially offset by the removal of 28 ERJ145s, 12 CRJ200s and nine CRJ700s during the 2016 year. 

Operating expenses were $1,162 million in Q4 2016, up $462 million from Q4 2015. The increase was due to the $466 million 50-seat aircraft non-cash asset impairment charge and $7 million in early lease return charges on four CRJ700s removed from service during the quarter, partially offset by lower direct operating costs from fewer aircraft in service. 

Q4 2016 Operational Update 

Dual-Class Aircraft (E175s, CRJ700s and CRJ900s): SkyWest Airlines, Inc. ("SkyWest Airlines") took delivery of 41 E175s during the 2016 year, of which 19 aircraft were delivered in Q4 2016. SkyWest's scheduled deliveries of its remaining E175 firm orders are below:

 

 

Scheduled E175 Aircraft Deliveries

 
 

Total in-service December 31, 2016

Q1 2017

Q2 2017

Q4 2017

Total anticipated 

in-service 

by end of 2017

United

58

2

5

-

65

Alaska

15

5

-

-

20

Delta

13

-

5

1

19

Total E175s:

86

7

10

1

104

As previously announced, during Q4 2016 ExpressJet Airlines, Inc. ("ExpressJet") and American Airlines agreed to place 12 used CRJ700 aircraft into service under a multi-year contract term. SkyWest Airlines had 23 CRJ700s in service with American at the end of 2016. In total, SkyWest Airlines and ExpressJet are scheduled to have 49 CRJ700s in service with American by mid-2017. The 49 CRJ700s scheduled for service with American were previously operated in SkyWest's existing fleet with other major airline partners. 

SkyWest previously announced that it expected to remove a total of 20 CRJ700s from service by early 2017 under an early lease return arrangement, of which eight aircraft have been removed from service and 12 aircraft are now under contract to be placed into service under the American agreement. SkyWest incurred $7 million (pre-tax) in early lease termination charges on four CRJ700s removed from service during Q4 2016 and other lease return costs on CRJ200 aircraft. 

50-seat Aircraft (CRJ200s and ERJ145/135s): At the end of 2016, SkyWest had 213 CRJ200s and 159 ERJ145/135s in scheduled service. SkyWest anticipates it will reduce its CRJ200s by approximately 46 aircraft and its ERJ145/135s by approximately 59 aircraft during 2017. As previously announced, ExpressJet anticipates it will transition to flying primarily dual-class aircraft in its CRJ operation by removing its CRJ200 aircraft from service over the next year. 

Operating Performance Update: Flight completion rates at SkyWest Airlines and ExpressJet for Q4 2016 and Q4 2015 are summarized as follows:

 

         
   

SkyWest Airlines

 

ExpressJet

   

Q4 2016

Q4 2015

 

Q4 2016

Q4 2015

Adjusted Completion *

 

99.9%

99.8%

 

99.8%

99.9%

Raw Completion

 

98.2%

98.4%

 

98.4%

98.0%

 

 

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

Q4 2016 Capital and Liquidity Update 

SkyWest had $565 million in cash and marketable securities at December 31, 2016, flat with September 30, 2016. SkyWest received $90 million from Bombardier during Q4 2016 as an early settlement of the terminated residual value guarantee agreements. Additionally, SkyWest used $76 million toward the purchase of 19 E175 aircraft and $17 million to pay off certain outstanding debt early at a discount during the quarter.

SkyWest issued $429 million in new long-term debt during Q4 2016 to finance the 19 new E175s delivered during the quarter. Total debt increased by $320 million during the fourth quarter from the new E175 aircraft acquired, net of scheduled principal payments. 

In Q4 2016, excluding aircraft purchased, SkyWest used $24 million for other capital investments.  

Reconciliation to Adjusted Net Income and Diluted Earnings per Share (unaudited)

(Dollars in thousands, except per diluted share)

                 
   

Three months ended December 31, 2016

   

Pre-tax income (loss)

 

Income tax (expense)

 

Net income (loss)

 

Net income (loss) per Diluted Share

GAAP income (loss)

 

$ (426,222)

 

$ 155,977

 

$ (270,245)

 

$ (5.22)

Q4 2016 adjustments (1)

 

465,649

 

(171,047)

 

294,602

   

Q4 2016 adjustments (2)

 

6,878

 

(2,526)

 

4,352

   

Non-GAAP income (3)

 

$ 46,305

 

$ (17,596)

 

$ 28,709

 

$ 0.54

                 
   

For the year ended December 31, 2016

   

Pre-tax income (loss)

 

Income tax (expense)

 

Net income (loss)

 

Net income (loss) per Diluted Share

GAAP income (loss)

 

$ (248,812)

 

$ 87,226

 

$ (161,586)

 

$ (3.14)

2016 year adjustments (1)

 

465,649

 

(171,047)

 

294,602

   

2016 year adjustments (4)

 

16,101

 

(6,023)

 

10,078

   

Non-GAAP income (3)

 

$ 232,938

 

$ (89,844)

 

$ 143,094

 

$ 2.73

                 
   

For the three months ended December 31, 2015

   

Pre-tax income 

 

Income tax (expense)

 

Net income

 

Net income per Diluted Share

GAAP income

 

$ 65,760

 

$ (25,306)

 

$ 40,454

 

$ 0.78

Q4 2015 adjustments (5)

 

(24,731)

 

9,517

 

(15,214)

   

Non-GAAP income

 

$ 41,029

 

$ (15,789)

 

$ 25,240

 

$ 0.49

                 
   

For the year ended December 31, 2015

   

Pre-tax income

 

Income tax (expense)

 

Net income

 

Net income per Diluted Share

GAAP income

 

$ 194,322

 

$ (76,505)

 

$ 117,817

 

$ 2.27

2015 year adjustments (5)

 

(24,731)

 

9,517

 

(15,214)

   

Non-GAAP income

 

$ 169,591

 

$ (66,988)

 

$ 102,603

 

$ 1.98

                 

 

The following adjustments allow investors to better understand and analyze our recurring core performance in the period presented.

(1)

Adjusts for a non-cash impairment charge on 50-seat aircraft and related long-lived assets and spare aircraft parts net of a $90 million early settlement of residual value guarantees with Bombardier received in Q4 2016. 

(2)

Adjusts for early lease return charges on four CRJ700s. 

(3)

Proforma diluted shares outstanding for Non-GAAP net income were 52,806,000 and 52,369,000 for the three and twelve months ended December 31, 2016, respectively.

(4)

Adjusts for early lease return charges on eight CRJ700s. 

(5)

Adjusts for a gain from an early debt payoff of approximately $32.6 million, partially offset by a resolution of a contract matter with a major partner of approximately $7.9 million reflected as a reduction to revenue. 

About SkyWest

SkyWest, Inc. is the holding company for two scheduled passenger airline operations and an aircraft leasing company. SkyWest's airline companies provide commercial air service in cities throughout North America with more than 3,100 daily flights carrying nearly 54 million passengers annually. SkyWest Airlines operates through partnerships with United Airlines, Delta Air Lines, American Airlines and Alaska Airlines. ExpressJet Airlines operates through partnerships with United Airlines, Delta Air Lines and American Airlines. Based in St. George, Utah, SkyWest continues to set the standard for excellence across the regional industry with unmatched value for customers, shareholders and its more than 19,000 employees.  

SkyWest, Inc. and Subsidiaries

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

 

2016

 

2015

2016

 

2015

OPERATING REVENUES

           

Passenger

$ 740,736

 

$ 736,938

$ 3,051,414

 

$ 3,030,023

Ground handling and other

17,280

 

15,805

69,792

 

65,540

Total operating revenues

758,016

 

752,743

3,121,206

 

3,095,563

             

OPERATING EXPENSES

           

Salaries, wages and benefits

295,637

 

297,261

1,211,380

 

1,203,312

Aircraft maintenance, materials and repairs 

144,584

 

142,891

569,306

 

604,863

Aircraft rentals

57,144

 

66,837

262,602

 

273,696

Depreciation and amortization

75,538

 

67,554

284,969

 

264,507

Aircraft fuel

31,457

 

27,870

122,284

 

118,124

Ground handling services

18,434

 

19,713

72,659

 

82,694

Special items

465,649

 

-

465,649

 

-

Other operating expenses

74,037

 

78,406

305,041

 

313,852

Total operating expenses

1,162,480

 

700,532

3,293,890

 

2,861,048

OPERATING INCOME (LOSS)

(404,464)

 

52,211

(172,684)

 

234,515

OTHER INCOME (EXPENSE)

           

Interest income

637

 

350

2,143

 

1,997

Interest expense

(22,301)

 

(19,391)

(78,177)

 

(75,850)

Other, net

(94)

 

32,590

(94)

 

33,660

Total other income (expense), net

(21,758)

 

13,549

(76,128)

 

(40,193)

             

INCOME (LOSS) BEFORE INCOME TAXES

(426,222)

 

65,760

(248,812)

 

194,322

PROVISION (BENEFIT) FOR INCOME TAXES

(155,977)

 

25,306

(87,226)

 

76,505

NET INCOME (LOSS)

$ (270,245)

 

$ 40,454

$ (161,586)

 

$ 117,817

             

BASIC EARNINGS (LOSS) PER SHARE

$ (5.22)

 

$ 0.80

$ (3.14)

 

$ 2.31

DILUTED EARNINGS (LOSS) PER SHARE

$ (5.22)

 

$ 0.78

$ (3.14)

 

$ 2.27

             

Weighted average common shares

           

Basic

51,757

 

50,880

51,505

 

51,077

Diluted

51,757

 

51,657

51,505

 

51,825

 

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)

       
 

December 31, 

2016

 

December 31, 

2015

Cash, restricted cash, and marketable securities

$ 564,907

 

$ 497,919

Other current assets

482,170

 

519,651

Total current assets

$ 1,047,077

 

$ 1,017,570

Property and equipment, net

3,782,897

 

3,432,597

Deposit on aircraft

38,800

 

38,150

Other long term assets

268,477

 

293,667

Total assets

$ 5,137,251

 

$ 4,781,984

       

Current portion, long-term debt

$ 305,460

 

$ 268,667

Other current liabilities

441,805

 

479,359

Total current liabilities

$ 747,265

 

$ 748,026

       

Long-term debt, net of current maturities

2,240,051

 

1,659,234

Other long-term liabilities

798,992

 

868,289

Stockholders' equity

1,350,943

 

1,506,435

Total liabilities and stockholder's equity

$ 5,137,251

 

$ 4,781,984

 

Unaudited Operating Highlights

 
 

Three Months Ended December 31

 

Twelve Months Ended December 31

 

2016

2015

Change

 

2016

2015

Change

Passengers carried

12,926,784

13,614,945

(5.1) %

 

53,539,438

56,228,593

(4.8) %

Revenue passenger miles (000)

6,795,102

7,231,965

(6.0) %

 

28,015,298

29,671,911

(5.6) %

Available seat miles (000)

8,197,829

8,768,088

(6.5) %

 

34,108,350

35,902,503

(5.0) %

Block hours

464,736

500,445

(7.1) %

 

1,938,492

2,074,804

(6.6) %

Departures

273,589

293,467

(6.8) %

 

1,153,480

1,226,897

(6.0) %

Passenger load factor

82.9%

82.5%

(0.4) pts

 

82.1%

82.6%

(0.5) pts

Yield per revenue passenger mile

$ 0.109

$ 0.102

6.9 %

 

$ 0.109

$ 0.102

6 9. %

Revenue per available seat mile

$ 0.092

$ 0.086

7.0 %

 

$ 0.092

$ 0.086

7.0 %

Cost per available seat mile

$ 0.145

$ 0.082

76.8 %

 

$ 0.099

$ 0.082

20.7 %

Average passenger trip length

526

531

(0.9) %

 

523

528

(0.9) %

               

 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)

         

SkyWest's total fleet in service increased by 10 aircraft during Q4 2016, as follows:

         
         

Aircraft available for scheduled service at September 30, 2016:

   

642

 

Additions:

       

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

9

     

New E175 aircraft added with Delta Air Lines ("Delta"):

8

     

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

2

     

Used CRJ700 aircraft placed with American Airlines ("American"):

5

     

Total Additions/Transitioned:

   

24

 

Removals: 

   

ERJ145 aircraft removed from service with United:

(9)

     

CRJ700 aircraft removed from service with Alaska:

(5)

     

Total Removals:

   

(14)

 

Aircraft available for scheduled service at December 31, 2016:

   

652

 
           

 

SkyWest's total fleet in service decreased by eight aircraft for the 2016 year, as follows:

 
 

Aircraft available for scheduled service at December 31, 2015:

   

660

 

Additions:

       

New E175 aircraft added with United:

18

     

New E175 aircraft added with Delta:

13

     

New E175 aircraft added with Alaska: 

10

     

Total Additions:

   

41

 

Removals:

   

ERJ145 aircraft removed from service with multiple partners:

(28)

     

CRJ200 aircraft removed from service with multiple partners:

(12)

     

CRJ700 aircraft removed from service with multiple partners:

(9)

     

Total Removals:

   

(49)

 

Aircraft available for scheduled service at December 31, 2016:

   

652

 
           

 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)

 

Completed Block Hours by Aircraft Type and by Airline

 
 

Three months ended December 31

 

Twelve months ended December 31

By Aircraft Type:

2016

 

2015

 

Variance %

 

2016

 

2015

 

Variance %

E175s

68,048

 

40,821

 

66.7

 

219,421

 

126,108

 

74.0

CRJ700/900s

137,351

 

164,275

 

(16.4)

 

608,377

 

654,364

 

(7.0)

Dual-class aircraft

205,399

 

205,096

 

0.1

 

827,798

 

780,472

 

6.1

                       

CRJ200s

143,319

 

154,819

 

(7.4)

 

619,840

 

659,358

 

(6.0)

ERJ145/135s

116,018

 

140,525

 

(17.4)

 

490,854

 

622,650

 

(21.2)

EMB120s

-

 

-

 

-

 

-

 

12,324

 

(100.0)

Single-class aircraft

259,337

 

295,344

 

(12.2)

 

1,110,694

 

1,294,332

 

(14.2)

Total Block Hours

464,736

 

500,440

 

(7.1)

 

1,938,492

 

2,074,804

 

(6.6)

                       
                       
 

Three months ended December 31

 

Twelve months ended December 31

By Airline:

2016

 

2015

 

Variance %

 

2016

 

2015

 

Variance %

SkyWest Airlines

269,586

 

271,068

 

(0.5)

 

1,105,031

 

1,074,809

 

2.8

ExpressJet

195,150

 

229,372

 

(14.9)

 

833,461

 

999,995

 

(16.7)

Total Block Hours

464,736

 

500,440

 

(7.1)

 

1,938,492

 

2,074,804

 

(6.6)

                       

 

Quarterly Fleet, Block Hour and ASM Production Forecast for 2017

 
 

As of 

12/31/2016

 

As of

3/31/2017

 

As of

6/30/2017

 

As of

9/30/2017

 

As of

12/31/2017

   

Fleet (1):

(Actual)

 

(Estimate)

 

(Estimate)

 

(Estimate)

 

(Estimate)

   

E175s

86

 

93

 

103

 

103

 

104

   

CRJ700/900s

194

 

194

 

194

 

194

 

194

   

CRJ200s

213

 

198

 

195

 

180

 

167

   

ERJ145s/135s

159

 

140

 

124

 

113

 

100

   

Totals

652

 

625

 

616

 

590

 

565

   
                       
 

Q1-2017

 

Q2-2017

 

Q3-2017

 

Q4-2017

 

Total 2017

   

Production (2):

(Estimate)

 

(Estimate)

 

(Estimate)

 

(Estimate)

 

(Estimate)

   

Block Hours

457,000

 

468,000

 

468,000

 

434,000

 

1,827,000

   

ASMs (in billions)

7.9 b

 

8.8 b

 

9.2 b

 

8.4 b

 

34.3 b

   

 

 

(1) Fleet count excludes aircraft removed from scheduled service. Actual fleet counts may vary from the forecast due to timing of aircraft removed from service, timing of aircraft transitioned into service and timing of new aircraft deliveries. 

 

(2) Actual production may vary from estimates for various reasons including, but not limited to, timing of aircraft removals and deliveries and anticipated flight completion rates.

 



Logos, product and company names mentioned are the property of their respective owners.