SkyWest manages to turn a profit in the first quarter

American Eagle Airlines (2nd)-SkyWest Airlines Bombardier CRJ700 (CL-600-2C10) N703SK (msn 10139) LAX (Michael B. Ing). Image: 937551.

SkyWest has issued this financial statement for the first quarter 2021:

First Quarter 2021 Highlights

  • Pre-tax income of $50 million, net income of $36 million, or $0.71 per diluted share
  • Placed nine used CRJ700 aircraft into service under a previously announced agreement with American Airlines; took delivery of one new CRJ900 aircraft under a previously announced agreement with Delta Air Lines
  • Named to Forbes America’s Best Employers 2021 List; also named a Best Place to Work in 2021, a Glassdoor Employees’ Choice Award

SkyWest, Inc. has reported financial and operating results for Q1 2021, including net income of $36 million, or $0.71 per diluted share, compared to net income of $30 million, or $0.59 per diluted share, for Q1 2020. Pre-tax income for Q1 2021 included $193 million in payroll support program grants received from U.S. Treasury Department (“U.S. Treasury”) reflected as a reduction to operating expenses.

Commenting on the results, Chip Childs, Chief Executive Officer of SkyWest, said, “We continued to see improvement in the demand for our product during the first quarter. Our strategy of investing in our fleet and delivering flexible solutions with solid operating performance to our customers continues to position SkyWest well for long-term success. I want to thank the SkyWest team for their commitment to excellence through these dynamic and challenging circumstances.”

Financial Results

Revenue was $535 million in Q1 2021, down from $730 million in Q1 2020, or 27%, due to a significant reduction in the number of flights SkyWest was scheduled to operate under its flying agreements compared to the same period last year because of the COVID-19 pandemic. SkyWest’s Q1 2021 completed departures and block hours were down 26% and 23%, respectively, from Q1 2020.

SkyWest deferred recognizing revenue on $21 million of fixed monthly payments received during Q1 2021. SkyWest will recognize the deferred revenue from the fixed monthly payments on a per-completed, block hour basis over the remaining contract term.

Operating expenses were $454 million in Q1 2021, down from $664 million in Q1 2020, or 32%. The reduction was due to $193 million in payroll support program grants received from U.S. Treasury under a payroll support program extension agreement (“PSP2”) reflected in the Q1 2021 results. Operating expenses were also down due to fewer flights operated in Q1 2021 compared to the same period last year, partially offset by an increase in maintenance expense on SkyWest’s CRJ700 fleet.

Capital and Liquidity

SkyWest had $836 million in cash and marketable securities at March 31, 2021, up from $826 million at December 31, 2020.

SkyWest has $665 million of available borrowings under its $725 million, five-year secured loan facility with U.S. Treasury under the CARES Act. SkyWest has until May 28, 2021 to borrow additional amounts under the facility and is evaluating its future utilization of the facility.

SkyWest has a $75 million line of credit facility with approximately $34 million of letters of credit issued under the facility and $41 million available under the line at March 31, 2021.

As previously announced, SkyWest entered into PSP2 with U.S. Treasury in January 2021 and received total proceeds of $233 million during Q1. In consideration for the funding, approximately $40 million was in the form of a ten-year, low interest unsecured term loan and SkyWest issued to U.S. Treasury warrants to purchase 98,815 shares of SkyWest common stock at a strike price of $40.41. In April 2021, SkyWest received additional proceeds of approximately $35 million under PSP2. In consideration of the additional funding, approximately $10.5 million was in the form of a ten-year, low interest unsecured term loan and SkyWest issued to U.S. Treasury warrants to purchase an additional 25,958 shares of SkyWest common stock at a strike price of $40.41.

Total debt at March 31, 2021 was $3.1 billion, down from $3.2 billion at December 31, 2021. Capital expenditures during Q1 2021 were $56 million for the purchase of four used CRJ700 aircraft, spare engines and other fixed assets.

As previously announced, SkyWest entered into a payroll support program 3 agreement (“PSP3”) with U.S. Treasury in April 2021 to receive total proceeds of approximately $250 million under the American Rescue Plan Act of 2021. SkyWest received half of the $250 million in April 2021 and expects to receive the remainder during the second quarter of 2021. In consideration for the funding, approximately $45 million will be in the form of a ten-year, low interest unsecured term loan, and SkyWest will issue to U.S. Treasury warrants to purchase approximately 78,317 shares of SkyWest common stock at a strike price of $57.47.

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 in response to COVID-19 schedule reductions. The anticipated future delivery dates summarized below are based on currently available information and are subject to change.

Flying contract with Delta Air Lines (“Delta”)

  • One new CRJ900, financed by Delta and operated by SkyWest was delivered in Q1 2021,

Flying contract with American Airlines (“American”) for 20 E175 aircraft

  • 18 aircraft deliveries are anticipated in the second half of 2021 and two deliveries are expected in 2022. The aircraft are scheduled to be placed into service in 2022.
  • SkyWest anticipates financing the aircraft through debt,

Flying contract with American for CRJ700 aircraft

  • SkyWest placed nine used CRJ700s in service during Q1 2021.
  • SkyWest anticipates placing an additional 16 used CRJ700s into service over the remainder of 2021.
  • SkyWest expects to have 90 CRJ700s under agreement with American by the end of 2021.

Top Copyright Photo: American Eagle Airlines (2nd)-SkyWest Airlines Bombardier CRJ700 (CL-600-2C10) N703SK (msn 10139) LAX (Michael B. Ing). Image: 937551.

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