SkyWest warns of a first quarter loss

SkyWest, Inc. (St. George) has announced that it expects its financial results for the quarter ended March 31, 2011, to be significantly lower than it previously anticipated. For the reasons discussed below, SkyWest is now forecasting a net loss of between $ (13.0) million and $ (15.0) million resulting in a basic and diluted loss per share estimated to be between $(0.24) and $(0.28) per share. SkyWest cautioned, however, that these estimates are preliminary and are subject to modification or revision in the course of completing SkyWest’s quarterly financial review procedures.

There are several primary factors that contributed to SkyWest’s determination of the estimated loss. First, SkyWest’s operating airlines, SkyWest Airlines, Inc. (St. George), Atlantic Southeast Airlines, Inc. (Atlanta) and ExpressJet Airlines, Inc. (Houston) on a consolidated basis, produced approximately 15,000 less block hours during the quarter ended March 31, 2011, primarily as a result of severe winter weather storms, mainly in January and February. As a result of the decreased block hour production, SkyWest experienced a negative impact on revenues currently estimated to be approximately $10.0 million pretax for the quarter ended March 31, 2011. Second, both Atlantic Southeast and ExpressJet have experienced additional crew costs during the quarter ended March 31, 2011. These additional crew costs are principally the result of 1) Atlantic Southeast having the opportunity to take delivery of additional aircraft to be used in contract flying not previously anticipated, 2) increased summer block hour production as scheduled by our major partners, and 3) the reallocation of crews based on major partner schedule changes in certain hubs. The additional cost related to the crew issues is currently anticipated to be approximately $11.5 million pretax for the quarter ended March 31, 2011. Third, Atlantic Southeast incurred expenses for unanticipated heavy checks on certain of its airframes and is incurring costs that are higher than anticipated on those heavy checks. Atlantic Southeast performed additional heavy checks as a result of the block hour schedule being reduced by its major partners, in the current quarter, and performed those heavy checks in advance of planned summer schedule block hour increases. The additional cost associated with these maintenance events is currently estimated to be approximately $8.5 million pretax for the quarter ended March 31, 2011. Fourth, beginning September 2010, Atlantic Southeast was required to reduce its contract rates, as contemplated by its Delta Connection Agreement, which resulted in a negative impact on revenues currently estimated at approximately $7.0 million pretax for the quarter ended March 31, 2011. Fifth, although SkyWest’s operating airlines are reimbursed by their major partners for fuel costs associated with flights they operate on a contract basis, SkyWest Airlines is exposed to the effect of fuel cost increases for flights its operates on a pro-rate basis. As a result of recent increases in jet fuel pricing, SkyWest currently estimates that it will incur approximately $5.5 million pretax in additional fuel costs. A more detailed explanation of these items and others affecting the quarter ended March 31, 2011 will be given when SkyWest formally announces its financial results, which is currently estimated to occur in early May 2011.

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