SkyWest, Inc. Announces Fourth Quarter And Full-Year 2013 Results

      SkyWest, Inc. Announces Fourth Quarter And Full-Year 2013 Results

PR Newswire

ST. GEORGE, Utah, Feb. 13, 2014

ST. GEORGE, Utah, Feb. 13, 2014 /PRNewswire/ --SkyWest, Inc. ("SkyWest")
(NASDAQ: SKYW) today reported net income of $8.6 million, or $0.17 per
diluted share, for the quarter ended December 31, 2013, compared to net income
of $13.9 million, or $0.27 per diluted share, for the same period last year.

SkyWest also reported net income of $59.0 million, or $1.12 per diluted share,
for the twelve months ended December 31, 2013, compared to $51.2 million, or
$0.99 per diluted share, for the same period last year.

Quarter Summary

For each of the quarters ended March, June and September of 2013, SkyWest
reported improved financial results, on a year-over-year basis, in achieving
increases in its fully-diluted earnings per share. However, SkyWest
experienced a decline in its financial results for the quarter ended December
31, 2013 compared to its financial results for the quarter ended December 31,
2012. During the quarter ended December 31, 2013, compared to the quarter
ended December 31, 2012, SkyWest experienced increased crew training costs as
a result of new regulations regarding pilots (FAR 117) that became effective
January 4, 2014 of approximately $3.0 million pretax. SkyWest also experienced
increased maintenance costs of approximately $5.0 million, pretax, due
primarily to performing additional C-checks related to used aircraft that were
added to SkyWest's fleet during 2013. Additionally during the quarter ended
December 31, 2013, SkyWest incurred approximately $3.0 million, pretax, of
costs associated with advanced pilot training and efforts to become certified
to operate the new Embraer E175 regional jets scheduled for deliveries
beginning in March 2014.

For the quarter ended December 31, 2013, SkyWest generated increased operating
revenues (net of fuel, certain engine overhaul, landing fee and station
pass-through revenues under SkyWest's contracts with its major partners), of
approximately $23.0 million, or 3.7%, compared to the quarter ended December
31, 2012, primarily due to additional block hour production of 2.8% and
scheduled rate escalations. The increased operating revenues were offset by
increased costs in several areas that resulted in a reduced amount of
operating and pre-tax income for the quarter ended December 31, 2013 compared
to the quarter ended December 31, 2012.

Following are selected statistics and information from the quarter ended
December 31, 2013, compared to the quarter ended December 31, 2012:

  oPre-tax income declined to $15.1 million, compared to $25.6 million
  oFully-diluted EPS declined to $0.17, compared to $0.27
  oIncreased block hour production 2.8% to 584,594 block hours, compared to
    568,808 block hours
  oIncreased operating revenues by approximately $23.0 million (net of fuel,
    certain engine overhaul, landing fees and station pass-through revenues)
    primarily related to rate escalations under SkyWest's agreements with its
    major partners and increased block hour production
  oIncreased total aircraft fleet to 757 aircraft as of December 31, 2013,
    compared to 744 aircraft as of December 31, 2012

Commenting on the results, Jerry C. Atkin, SkyWest's Chairman and CEO, said,
"The decrease in our earnings in the fourth quarter is primarily due to
advance preparations for the implementation of FAR 117, the new flight and
duty time regulations, and aging maintenance costs on the 50-seat aircraft. We
also invested in our future by beginning certification work on the E175
aircraft that are scheduled for delivery beginning in the first quarter of
2014."

Financial and Operating Results

Operating revenues totaled $804.4 million for the quarter ended December 31,
2013, compared to $810.7 million for the same period last year or a decrease
of $6.3 million. The decrease was due primarily to the reduction of
approximately $29.2 million in fuel expenses, certain engine overhaul amounts,
landing fees and station costs which were directly reimbursed by SkyWest's
major partners and recorded as operating revenues. However, this reduction
was mostly offset by recording $23.0 million in additional operating revenues,
primarily resulting from rate escalations under SkyWest's agreements with its
major partners and a 2.8% increase in total block hours for the quarter ended
December 31, 2013, compared to the quarter ended December 31,
2012.

Total airline expenses (consisting of total operating and interest expenses)
increased $4.0 million, or 0.5%, during the quarter ended December 31, 2013,
compared to the same period in 2012. However, after deducting pass-through
costs for fuel, certain engine overhaul expenses landing fees and station
costs from total operating cost and interest expenses, the remaining total
airline expenses increased $33.4 million. Management estimates that
approximately $16.9 million of the increase was due primarily to the 2.8%
increase in block hour production and approximately $16.4 million was
primarily due to additional maintenance costs, cost increases resulting from
new pilot regulations (FAR 117) and costs incurred from certifying a new E175
aircraft type.

Under certain of its agreements with its major partners, SkyWest recognizes
revenue at fixed hourly rates for mature engine maintenance on regional jet
engines and recognizes engine maintenance expense on its CRJ200 regional jet
engines on an as-incurred basis as maintenance expense. During the quarter
ended December 31, 2013, CRJ200 engine expense under these agreements
decreased $1.0 million to $9.6 million, compared to $10.6 million for the
quarter ended December 31, 2012, primarily as a result of decreased engine
overhaul expense due to the timing of scheduled engine maintenance events.
SkyWest was reimbursed approximately $12.7 million and $10.3 million for
engine overhaul expense, under its agreements with its major partners, during
the quarters ended December 31, 2013 and 2012, respectively.

Liquidity

At December 31, 2013, SkyWest had $670.1 million in cash and marketable
securities, compared to $709.4 million as of December 31, 2012. Cash and
marketable securities decreased $39.3 million during the quarter ended
December 31, 2013 compared to the balance as of December 31, 2012, due
primarily to SkyWest's payment of $40.0 million (total amount required under
agreement) related to deposits on its new order for E175 regional jet
aircraft. SkyWest's long-term debt was $1.29 billion as of December 31, 2013,
compared to $1.47 billion as of December 31, 2012. The decrease in long-term
debt for the twelve-months ended December 31, 2013 was due primarily to
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 5.8% discount rate, the present value of these lease obligations
was approximately $1.5 billion as of December 31, 2013.

Business Developments

On May 21, 2013, SkyWest announced it had entered into a Capacity Purchase
Agreement ("CPA") with United Airlines, Inc. ("United") to operate 40 new
Embraer E175 dual-class regional jet aircraft. The CPA is for 12 years and the
new aircraft will be operated by SkyWest's wholly-owned subsidiary, SkyWest
Airlines, Inc. ("SkyWest Airlines"). Deliveries for these aircraft are
scheduled to begin in March 2014 and continue through July 2015.

Additionally, on May 21, 2013 SkyWest announced it reached an agreement with
Embraer S.A. ("Embraer") for the purchase of 100 new E175 dual-class regional
jet aircraft, 40 of which are considered firm orders and the remaining 60
aircraft remain conditional upon SkyWest entering into capacity purchase
agreements with other major airlines. SkyWest intends to place the 40 new E175
aircraft into service under the terms of the United CPA discussed above.

On June 17, 2013, SkyWest and Embraer jointly announced an aircraft purchase
agreement covering 100 E175-E2 dual-class regional jet aircraft and an option
to purchase an additional 100 of the same aircraft. Deliveries for these E2
aircraft are tentatively planned to start in 2020.

During 2012, SkyWest announced the award of 34 additional dual-class aircraft
and the removal of 66 CRJ200 aircraft under its Delta Connection Agreements
with Delta Airlines, Inc. ("Delta"). As of May 2013, all 34 of these
additional dual-class aircraft had been delivered. As of December 31, 2013
SkyWest had removed 33 (22 placed in contract with another major partner and
11 removed from SkyWest's fleet) of the 66 CRJ200 aircraft from service and
currently anticipates removing another 29 CRJ200 aircraft during 2014.
SkyWest believes the remaining four CRJ200 aircraft will be removed from its
fleet in early 2015. Additionally, 41 of the 66 CRJ200 aircraft have been
financed by Delta and will be returned to Delta with no further obligation by
SkyWest.

About SkyWest

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 scheduled passenger airline operations consist of SkyWest Airlines,
also based in St. George, Utah, and ExpressJet Airlines, Inc. ("ExpressJet
Airlines"), based in Atlanta, Georgia. SkyWest Airlines operates as United
Express, Delta Connection, American Eagle and US Airways Express carriers
under contractual agreements with United, Delta, American Airlines, Inc.
("American") and US Airways, Inc. ("US Airways"). SkyWest Airlines also
operates flights for Alaska Airlines under a contractual agreement.
ExpressJet Airlines operates as United Express, Delta Connection, and American
Eagle carriers under contractual agreements with United, Delta and American.
System-wide, SkyWest serves markets in the United States, Canada, Mexico and
the Caribbean with approximately 3,800 daily departures and a fleet of
approximately 757 regional aircraft. This press release and additional
information regarding SkyWest can be accessed at www.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," "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 Airlines, 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, uncertainties regarding operation of new
aircraft, the ability to obtain certain regulatory approvals to operate new
aircraft under SkyWest Airlines' and ExpressJet Airlines' operating
certificates and the ability to obtaining financing for the aircraft.

Actual operational and financial results of SkyWest, SkyWest Airlines and
ExpressJet Airlines will 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
Airlines 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 Airlines may not meet SkyWest's
forecasts and the timing of ongoing consolidation of the operations of
ExpressJet Airlines, 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; ongoing
negotiations between SkyWest, SkyWest Airlines and ExpressJet Airlines and
their major partners regarding their contractual obligations; the financial
stability of those major partners and any potential impact of their financial
condition on the operations of SkyWest, SkyWest Airlines, or ExpressJet
Airlines; the resolution of current litigation with a major airline partner of
SkyWest Airlines and ExpressJet Airlines; 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; 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, 2012, entitled "Risk Factors."

SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars and Shares in Thousands, Except per Share Amounts)
(Unaudited)
                              Three Months Ended       Twelve Months Ended
                              December 31,             December 31,
                              2013        2012         2013        2012
OPERATING REVENUES:
 Passenger               $         $ 795,978   $ 3,239,525 $ 3,467,546
                              790,642
 Ground handling and     13,726      14,747       58,200      66,826
other
 Total operating     804,368     810,725      3,297,725   3,534,372
revenues
OPERATING EXPENSES:
 Salaries, wages and     306,682     293,093      1,211,307   1,171,689
benefits
 Aircraft maintenance,
materials and                 170,875     149,259      686,381     659,869
repairs
 Aircraft fuel           47,374      53,916       193,513     426,387
 Aircraft rentals        80,029      82,199       325,360     333,637
 Depreciation and        61,696      60,758       245,005     251,958
amortization
 Station rentals and     14,129      36,333       114,688     169,855
landing fees
 Ground handling         30,885      31,805       129,119     125,148
services
 Other                   61,878      59,612       239,241     229,842
 Total operating     773,548     766,975      3,144,614   3,368,385
expenses
OPERATING INCOME              30,820      43,750       153,111     165,987


OTHER INCOME (EXPENSE):
 Interest income         526         1,878        3,689       7,928
 Interest expense        (16,168)    (18,739)     (68,658)    (77,380)
 Other, net              (87)        (1,333)      10,390      (10,639)
 Total other (expense),  (15,729)    (18,194)     (54,579)    (80,091)
net
INCOME BEFORE INCOME TAXES    15,091      25,556       98,532      85,896
PROVISION FOR INCOME TAXES    6,482       11,610       39,576      34,739
NET INCOME                    $       $  13,946  $         $  
                              8,609                    58,956     51,157
BASIC EARNINGS PER SHARE      $      $         $       $    
                              0.17        0.27        1.14       1.00
DILUTED EARNINGS PER SHARE    $      $         $       $    
                              0.17        0.27        1.12       0.99
Weighted average common
shares:
 Basic                   51,228      51,296       51,688      51,090
 Diluted                 52,034      52,161       52,422      51,746



SKYWEST, INC.
SUMMARY OF CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
                                              December 31,      December 31,
                                              2013              2012
Cash, restricted cash, and marketable         $    670,094   $   709,442
securities
Deposit on aircraft                           40,000            -
Other current assets                          754,343           724,598
Total current assets                          $   1,464,437   $  1,434,040
Property and equipment                        2,651,793         2,710,996
Other long term assets                        116,989           109,601
Total assets                                  $   4,233,219   $  4,254,637
Current liabilities                           $    620,464  $   591,425
Long-term liabilities                         2,177,816         2,276,037
Stockholders' equity                          1,434,939         1,387,175
Total liabilities and stockholder's equity    $   4,233,219   $  4,254,637



Unaudited Operating Highlights
 Operating     Three Months Ended             Twelve Months Ended
Highlights
                December 31,                   December 31,
                 2013       2012       %      2013       2012       % Change
                                       Change
Passengers       14,829,568 14,735,499 0.6%    60,581,948 58,803,690 3.0%
carried
Revenue
passenger miles  7,931,065  7,491,169  5.9%    31,834,735 30,088,278 5.8%
(000)
Available seat   9,692,466  9,235,586  4.9%    39,207,910 37,278,554 5.2%
miles (000)
Passenger load   81.8%      81.1%          81.2%      80.7%      
factor                                 0.70pts                       0.50pts
Passenger                                                        
breakeven load   80.3%      78.6%      1.70pts 79.1%      78.7%      0.40pts
factor
Yield per        $       $               $      $   
revenue          0.100     0.106      (5.7)%  0.102     0.115     (11.3)%
passenger mile
Revenue per      $       $               $      $   
available seat   0.083     0.088      (5.7)%  0.084     0.095     (11.6)%
mile
Cost per         $       $               $      $   
available seat   0.081     0.085      (4.7)%  0.082     0.092     (10.9)%
mile
Fuel cost per    $       $               $      $   
available seat   0.005     0.006      (16.7)% 0.005     0.011     (54.5)%
mile
Average
passenger trip   535        508        5.3%    525        512        2.5%
length
Block hours      584,594    568,808    2.8%    2,380,118  2,297,014  3.6%
Departures       350,800    355,626    (1.4)%  1,453,601  1,435,512  1.3%



2014 Quarterly Fleet, Block Hour and ASM Production Estimates
                As of        As of        As of         As of

                March 31,    June 30,     September     December
                2014         2014         30, 2014      31, 2014
Fleet Summary
Regional Jets:
50 seats        492          487          457           452
66-76 seats     204          211          218           228
                696          698          675           680
Turbo props:
30 seats        45           45           45            45
Totals          741          743          720           725
                Q1 14        Q2 14        Q3 14         Q4 14        Totals
Block hour      556,450      584,350      597,450       567,375      2,305,630
production
ASM production  9.2b         9.8b         10.0b         9.5b         38.5b

SOURCE SkyWest, Inc.

Website: http://www.skywest.com
Contact: Michael J. Kraupp, Chief Financial Officer and Treasurer, Telephone:
(435) 634-3212, Fax: (435) 634-3205
 
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