SkyWest, Inc. (NASDAQ: SKYW) today reported financial and operating results for Q3 2022, including net income of $48 million, or $0.96 per diluted share, compared to net income of $10 million, or $0.19 per diluted share, for Q3 2021 and adjusted net income of $74 million, or $1.45 per diluted share, for Q3 2021.
Commenting on the results, Chip Childs, Chief Executive Officer of SkyWest, said, “We continue to experience strong demand for our product and our operational performance through the busy summer season was strong with 99.9% adjusted completion this quarter. We were pleased to have finalized new salary scales for our pilots during the quarter and continue efforts to stabilize our crew imbalance. I want to thank our people for their dedicated, world-class efforts.”
Financial Results
Revenue was $789 million in Q3 2022, up $44 million or 6%, from $745 million in Q3 2021. This quarter’s year-over-year increase in revenue under SkyWest’s flying contracts came from adding 33 E175 aircraft to its operations since Q3 2021 and eliminating the COVID-19 partner revenue concessions from Q3 last year.
Operating expenses were $714 million in Q3 2022, up 2% from $698 million in Q3 2021. The increase in operating expenses was primarily due to an increase in salaries, wages, and benefits, offset by a decrease in maintenance costs for Q3 2022, compared to Q3 2021.
Capital and Liquidity
SkyWest had $1.0 billion in cash and marketable securities at September 30, 2022, up from $975 million at June 30, 2022, and $860 million at December 31, 2021.
Total debt at September 30, 2022 was $3.4 billion, up from $3.3 billion at June 30, 2022, reflecting the financing of nine new E175 aircraft delivered in Q3 2022. Capital expenditures during Q3 2022 were $224 million for the purchase of these nine E175s and other fixed assets.
Status Update on Previously Announced Agreements
SkyWest is coordinating with its major airline partners to optimize the timing of upcoming fleet deliveries under previously announced agreements. SkyWest expects to finance the future E175 deliveries discussed below through debt. The anticipated future delivery dates summarized below are based on currently available information and are subject to change.
Flying contract with American for 20 E175 aircraft
- Two aircraft were delivered in Q3 2022, completing the 20 E175 aircraft deliveries under this contract.
Flying contract with Delta for 16 E175 aircraft
- Seven aircraft were delivered in Q3 2022.
- Four aircraft deliveries are anticipated in Q4 2022.
- Three aircraft are anticipated to be delivered in 2023 and 2024.
- Two aircraft were delivered prior to Q3 2022.
Flying contract with Alaska for 11 E175 aircraft
- One aircraft is expected to be delivered in 2025, which will complete the 11 E175 aircraft deliveries under this contract.
Combined, SkyWest anticipates placing 47 E175 aircraft into service under these three previously announced agreements by late 2025. As of September 30, 2022, 39 aircraft were delivered and eight aircraft have deliveries scheduled through 2025. By the end of 2025, SkyWest is scheduled to operate a total of 240 E175 aircraft.
About SkyWest
SkyWest, Inc. is the holding company for SkyWest Airlines and SkyWest Leasing, an aircraft leasing company. SkyWest Airlines has a fleet of over 500 aircraft connecting passengers to over 230 destinations throughout North America. SkyWest Airlines operates through partnerships with United Airlines, Delta Air Lines, American Airlines and Alaska Airlines carrying more than 36 million passengers in 2021.
| SkyWest, Inc. and Subsidiaries 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, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| OPERATING REVENUES: | ||||||||||||
| Flying agreements | $ | 763,514 | $ | 719,084 | $ | 2,245,351 | $ | 1,863,242 | ||||
| Lease, airport services and other | 25,929 | 25,699 | 78,329 | 73,086 | ||||||||
| Total operating revenues | 789,443 | 744,783 | 2,323,680 | 1,936,328 | ||||||||
| OPERATING EXPENSES: | ||||||||||||
| Salaries, wages and benefits | 307,727 | 265,603 | 896,347 | 718,868 | ||||||||
| Aircraft maintenance, materials and repairs | 183,182 | 209,795 | 506,478 | 604,501 | ||||||||
| Depreciation and amortization | 97,433 | 109,597 | 297,427 | 329,089 | ||||||||
| Aircraft fuel | 28,179 | 32,561 | 85,089 | 77,622 | ||||||||
| Airport-related expenses | 17,501 | 25,992 | 54,196 | 72,478 | ||||||||
| Aircraft rentals | 16,089 | 16,098 | 48,109 | 47,311 | ||||||||
| Special items - impairment charges | — | 84,592 | — | 84,592 | ||||||||
| Payroll support grant | — | (115,352) | — | (422,669) | ||||||||
| Other operating expenses | 63,756 | 68,847 | 219,808 | 181,621 | ||||||||
| Total operating expenses | 713,867 | 697,733 | 2,107,454 | 1,693,413 | ||||||||
| OPERATING INCOME | 75,576 | 47,050 | 216,226 | 242,915 | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||
| Interest income | 6,348 | 238 | 9,332 | 732 | ||||||||
| Interest expense | (33,283) | (28,980) | (92,308) | (94,274) | ||||||||
| Other income (expense), net | 8,112 | (4,098) | 21,011 | (3,802) | ||||||||
| Total other expense, net | (18,823) | (32,840) | (61,965) | (97,344) | ||||||||
| INCOME BEFORE INCOME TAXES | 56,753 | 14,210 | 154,261 | 145,571 | ||||||||
| PROVISION FOR INCOME TAXES | 8,381 | 4,526 | 34,204 | 37,993 | ||||||||
| NET INCOME | $ | 48,372 | $ | 9,684 | $ | 120,057 | $ | 107,578 | ||||
| BASIC EARNINGS PER SHARE | $ | 0.96 | $ | 0.19 | $ | 2.38 | $ | 2.14 | ||||
| DILUTED EARNINGS PER SHARE | $ | 0.96 | $ | 0.19 | $ | 2.37 | $ | 2.12 | ||||
| Weighted average common shares: | ||||||||||||
| Basic | 50,593 | 50,380 | 50,531 | 50,337 | ||||||||
| Diluted | 50,636 | 50,725 | 50,636 | 50,726 | ||||||||
| SkyWest, Inc. and Subsidiaries Summary of Consolidated Balance Sheets (Dollars in Thousands) (Unaudited) | |||||
| September 30, | December 31, | ||||
| 2022 | 2021 | ||||
| Cash and marketable securities | $ | 1,004,197 | $ | 860,410 | |
| Other current assets | 257,992 | 208,183 | |||
| Total current assets | 1,262,189 | 1,068,593 | |||
| Property and equipment, net | 5,591,542 | 5,373,635 | |||
| Deposits on aircraft | 47,229 | 124,964 | |||
| Other long-term assets | 553,244 | 558,755 | |||
| Total assets | $ | 7,454,204 | $ | 7,125,947 | |
| Current portion, long-term debt | $ | 429,425 | $ | 391,798 | |
| Other current liabilities | 730,470 | 802,823 | |||
| Total current liabilities | 1,159,895 | 1,194,621 | |||
| Long-term debt, net of current maturities | 2,982,034 | 2,717,420 | |||
| Other long-term liabilities | 916,327 | 946,392 | |||
| Stockholders' equity | 2,395,948 | 2,267,514 | |||
| Total liabilities and stockholders' equity | $ | 7,454,204 | $ | 7,125,947 | |
| SkyWest, Inc. and Subsidiaries Additional Operational Information (unaudited) | ||||||
| SkyWest’s fleet in scheduled service or under contract by aircraft type: | ||||||
| September 30, 2022 | December 31, 2021 | September 30, 2021 | ||||
| E175 aircraft | 232 | 211 | 199 | |||
| CRJ900 aircraft | 44 | 44 | 40 | |||
| CRJ700 aircraft | 114 | 114 | 106 | |||
| CRJ200 aircraft | 140 | 140 | 141 | |||
| Total aircraft in service or under contract | 530 | 509 | 486 | |||
As of September 30, 2022, SkyWest leased 35 CRJ700s and five CRJ900s to third parties (these aircraft are excluded from the table above). The E175 aircraft counts are based on delivery date.
| Selected operational data: | ||||||||||||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||
| Block hours by aircraft type: | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||
| E175s | 169,679 | 169,143 | 0.3 | % | 481,080 | 446,867 | 7.7 | % | ||||||||||
| CRJ900s | 25,134 | 34,031 | (26.1) | % | 78,468 | 87,750 | (10.6) | % | ||||||||||
| CRJ700s | 62,540 | 78,788 | (20.6) | % | 202,538 | 215,263 | (5.9) | % | ||||||||||
| CRJ200s | 66,389 | 88,500 | (25.0) | % | 207,402 | 220,809 | (6.1) | % | ||||||||||
| Total block hours | 323,742 | 370,462 | (12.6) | % | 969,488 | 970,689 | (0.1) | % | ||||||||||
| Departures | 194,683 | 210,251 | (7.4) | % | 570,572 | 550,643 | 3.6 | % | ||||||||||
| Passengers carried | 10,715,415 | 10,862,343 | (1.4) | % | 30,627,250 | 25,872,805 | 18.4 | % | ||||||||||
| Adjusted flight completion | 99.9 | % | 99.8 | % | 0.1 | pts | 99.6 | % | 99.9 | % | (0.3) | pts | ||||||
| Raw flight completion | 99.1 | % | 98.8 | % | 0.3 | pts | 98.2 | % | 98.6 | % | (0.4) | pts | ||||||
| Passenger load factor | 84.6 | % | 79.1 | % | 5.5 | pts | 82.9 | % | 72.0 | % | 10.9 | pts | ||||||
| Average trip length | 488 | 537 | (9.0) | % | 498 | 536 | (7.1) | % | ||||||||||
Adjusted flight completion percent excludes weather cancellations. Raw flight completion includes weather cancellations.
| Reconciliation to Adjusted Net Income and Diluted Earnings per Share (Dollars in Thousands, Except per Diluted Share Amounts) (Unaudited) | ||||||||||||
| For the three months ended September 30, 2021 | ||||||||||||
| Pretax income | Income tax benefit (expense) | Net income | Net income per diluted share | |||||||||
| GAAP Income | $ | 14,210 | $ | (4,526) | $ | 9,684 | $ | 0.19 | ||||
| Q3 2021 Adjustments (1) | 84,592 | (20,683) | 63,909 | |||||||||
| Non-GAAP Adjusted Income | $ | 98,802 | $ | (25,209) | $ | 73,593 | $ | 1.45 | ||||
| For the nine months ended September 30, 2021 | ||||||||||||
| Pretax income | Income tax benefit (expense) | Net income | Net income per diluted share | |||||||||
| GAAP Income | $ | 145,571 | $ | (37,993) | $ | 107,578 | $ | 2.12 | ||||
| 2021 Adjustments (1) | 84,592 | (20,683) | 63,909 | |||||||||
| Non-GAAP Adjusted Income | $ | 230,163 | $ | (58,676) | $ | 171,487 | $ | 3.38 | ||||
| (1) | Adjusts for a non-cash impairment charge on SkyWest Airlines operated CRJ900 aircraft. |