Tag Archives: CL6002B19

SkyWest, Inc. reports lower fourth quarter net profit of $8.6 million and a higher net profit of $59 million for 2013

SkyWest, Inc. (SkyWest Airlines and ExpressJet Airlines) (St. George, Utah) 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 175 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:

Pre-tax income declined to $15.1 million, compared to $25.6 million
Fully-diluted EPS declined to $0.17, compared to $0.27
Increased block hour production 2.8% to 584,594 block hours, compared to 568,808 block hours
Increased 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
Increased total aircraft fleet to 757 aircraft as of December 31, 2013, compared to 744 aircraft as ofDecember 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 Embraer 175 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. to operate 40 new Embraer 175 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. (St. George). 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. 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. (Atlanta). 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.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Even though SkyWest is shrinking its Bombardier CRJ200 fleet, it was fortunate to place some of the grounded CRJ200s with American Airlines as an American Eagle carrier. SkyWest’s Bombardier CRJ200 (CL-600-2B19) N864AS (msn 7502) departs the runway at Los Angeles International Airport.

American Eagle-SkyWest:

Air Canada to launch daily, year-round flights between Sydney, Nova Scotia and Toronto Pearson on December 18

Air Canada (Montreal) today announced that in response to growing customer demand it will launch daily, year-round service between Sydney, Nova Scotia and Toronto (Pearson) beginning on December 18, 2013 .

Air Canada and TCA has been serving Sydney and Cape Breton for 71 years.

Air Canada’s year-round, daily service between Sydney and Toronto will be operated by Jazz Aviation (Halifax) under the Air Canada Express brand using 50-seat CRJ200 regional jets. It will be the only year-round, nonstop flights operated between Sydney, Nova Scotia and Toronto .

Sydney-Toronto year-round service:

Flight	Depart	Arrival
AC 8795	Sydney at 05:55	Toronto at 07:33
AC 8794	Toronto at 20:50	Sydney at 00:10

Copyright Photo: TMK Photography/AirlinersGallery.com. Jazz Aviation’s Bombardier CRJ200 (CL-600-2B19) C-FZJA (msn 7988) rests between assignments at the Toronto (Pearson) hub.

Air Canada:

Air Canada Regional-Jazz:

SkyWest reports increased net income of $20.7 million in the second quarter

SkyWest, Inc. (SkyWest Airlines and Atlantic Southeast Airlines) (St. George) today reported net income of $20.7 million, or $0.39 per diluted share, for the quarter ended June 30, 2013, compared to net income of $17.0 million, or $0.33 per diluted share, for the same period last year.

SkyWest also reported net income of $24.0 million, or $0.46 per diluted share, for the six months ended June 30, 2013, compared to $16.3 million, or $0.32 per diluted share, for the same period last year.

Quarter Highlights

SkyWest experienced improved financial results for the quarter ended June 30, 2013 compared to its financial results for the quarter ended June 30, 2012. SkyWest generated additional block hour production and corresponding operating revenues (after giving effect to reduced fuel and certain engine overhaul pass through revenues) as a result of increased utilization and increasing the size of its aircraft fleet between June 30, 2013 and June 30, 2012. Following are selected highlights from SkyWest’s quarter ended June 30, 2013, compared to the quarter ended June 30, 2012:

Increased pretax income 17.8% to $33.7 million, compared to $28.6 million
Increased fully-diluted EPS 18.2% to $0.39, compared to $0.33
Increased block hour production 6.1% to 609,711 block hours, compared to 574,884 block hours
Recorded approximately $28.2 million in additional revenues (net of fuel and certain engine overhaul pass through revenues), primarily related to increased block hour production
Increased total aircraft fleet to 760 aircraft as of June 30, 2013, compared to 725 aircraft as of June 30, 2012

Commenting on the results, Jerry C. Atkin, SkyWest’s Chairman and CEO, said “We are pleased with the progress we continue to make in producing improved operational and financial performance as compared to the same period last year.” He continued, “We will remain focused on our profit improvement objectives while continuing to deal with the ever-present challenges in the airline industry.”

Financial and Operating Results

Operating revenues totaled $839.1 million for the quarter ended June 30, 2013, compared to $937.2 million for the same period last year or a decrease of $98.1 million. The decrease was due primarily to the reduction of $117.9 million of fuel and certain engine overhaul amounts which were directly reimbursed by SkyWest’s major partners and recorded as operating revenues. However, this reduction was partially offset by recording approximately $28.2 million in additional operating revenues primarily resulting from a 6.1% increase total block hours for the quarter ended June 30, 2013, compared to the quarter ended June 30, 2012.

Total airline expenses (consisting of total operating and interest expenses) decreased $103.7 million, or 11.4%, during the quarter ended June 30, 2013, compared to the same period in 2012. However, after excluding pass-through costs for fuel and certain engine overhaul expenses, total airline expenses increased $14.2 million or only 1.9% which was less than the 6.1% increase in block hours produced.

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 SkyWest recognizes engine maintenance expense on its CRJ200 regional jet engines on an as-incurred basis as maintenance expense. During the quarter ended June 30, 2013, CRJ200 engine expense under these agreements decreased $3.2 million to $10.6 million compared to $13.8 million for the quarter ended June 30, 2012, as a result of decreased engine overhaul expense due to the timing of scheduled engine maintenance events. SkyWest was reimbursed approximately $12.8 million and $10.2 million for engine overhaul expense, under its agreements, in each of the periods ended June 30, 2013 and 2012, respectively.

Liquidity

At June 30, 2013, SkyWest had $665.6 million in cash and marketable securities, compared to $709.4 million as of December 31, 2012. The decrease in cash and marketable securities of $43.8 million was primarily the result of the payment of scheduled semi-annual lease and debt payments as well as making deposits on recent aircraft orders. Cash and marketable securities increased $34.1 million during the quarter ended June 30, 2013 compared to the balance of $631.5 as of the quarter ended March 31, 2013. SkyWest’s long-term debt was $1.38 billion as of June 30, 2013, compared to $1.47 billion as of December 31, 2012. The decrease in long-term debt for the six-months ended June 30, 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 4.7% discount rate, the present value of these lease obligations was approximately $1.5 billion as of June 30, 2013.

Recent Business Developments

On May 21, 2013, SkyWest announced it had entered into a Capacity Purchase Agreement (“CPA”) with United Airlines, Inc. (Chicago) to operate 40 new Embraer ERJ 175 dual-class regional jet aircraft. The CPA is for 12 years and the aircraft will be operated by SkyWest’s wholly-owned subsidiary, SkyWest Airlines, Inc. (St. George). Deliveries for these aircraft are scheduled to begin in April 2014 and continue through August 2015.

Additionally, on May 21, 2013 SkyWest announced it reached an agreement with Embraer S.A. for the purchase of 100 new ERJ 175 dual-class regional jet aircraft, 40 of which are considered firm and 60 aircraft remain conditional upon SkyWest entering into capacity purchase agreements with other major airlines. SkyWest intends to place the 40 new aircraft into service under the terms of the United CPA discussed above.

On August 2, 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. (Atlanta) and by end of May 2013, all 34 of these dual-class aircraft had been delivered. As of June 30, 2013 SkyWest had removed 24 (22 placed in contract with another partner; other 2 removed from fleet) of the 66 CRJ200 aircraft and currently anticipates removing another 24 CRJ200 aircraft during the months of September 2013 through December 2013. These 24 aircraft have been financed by Delta and will be returned to Delta with no further obligation by SkyWest. SkyWest believes the remaining 18 aircraft will be removed at various times through 2014 and early 2015.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. The CRJ200s will be totally removed from the Delta Connection contract by early 2015. SkyWest Airlines Bombardier CRJ200 (CL-600-2B19) N423SW (msn 7456) approaches Los Angeles International Airport.

Delta Connection-SkyWest Airlines:

Aeromar is coming to Austin, Texas

Aeromar (Transportes Aeromar S.A.) (Mexico City) is coming to Austin, Texas. The Mexican carrier will commence nonstop Mexico City-Austin nonstop flights on October 21 per the Austin Business Journal. The new route will be operated five days a week with Bombardier CRJ200 regional jets.

Copyright Photo: Juan Carlos Guerra/Airlinersgallery.com. Bombardier CRJ200 (CL-600-2B19) XA-UPA (msn 7545) arrives at the Mexico City hub.

Aeromar (Mexico):

SkyWest reports quarterly income of $3.2 million, will remove 66 CRJ200s from the Delta contract

SkyWest, Inc. (SkyWest Airlines) (St. George) today reported net income of $3.2 million, or $0.06 per diluted share, for the quarter ended March 31, 2013, compared to a net loss of $(0.7) million, or $(0.01) per diluted share, for the same period last year.

Quarter Highlights

SkyWest’s financial results for the quarter ended March 31, 2013 were slightly improved compared to the financial results for the quarter ended March 31, 2012. SkyWest generated a 2.8 percent increase in block hours which resulted in additional revenues of approximately $10.5 million; however, overall revenues decreased by a total of $117.7 million as a result of lower reimbursement payments of $99.7 million for fuel and $19.7 million for engine overhaul expenses, under its contracts with SkyWest’s major partners. The majority of fuel is now purchased directly by SkyWest’s major partners and as a result, SkyWest reports lower operating revenues and expenses. SkyWest’s financial results were also negatively impacted during the quarter ended March 31, 2013 by severe weather which resulted in approximately 1,900 cancelled flights and 4,500 fewer block hours at an estimated impact of $4.5 million (pretax).

Following are some selected highlights for the quarter ended March 31, 2013 compared to the same period last year:

(Unaudited) Dollars in thousands, except per share amounts	Three Months Ended March 31,
	2013	2012	% Change


Total operating revenue	$ 803.5	$ 921.2	(12.8)%
Total operating margin	1.9%	2.2%	(0.3)pts
Pretax income (loss)	$ 5.4	$ (1.2)	NM
Net income (loss)	$ 3.2	$ (0.7)	NM
Fully diluted earnings per share	$ 0.06	$ (0.01)	NM
Block hours	571,991	556,421	2.8%

Commenting on the results, Jerry C. Atkin, SkyWest’s Chairman and CEO, said “We had planned to achieve improved financial results for the quarter just ended over the same period last year, however our results were negatively impacted primarily by weather and other operational challenges,” He continued, “In spite of the challenges experienced during the quarter, we remain optimistic on our profit improvement objectives as well as improved operating results.”

Financial and Operating Results

Operating revenues totaled $803.5 million for the quarter ended March 31, 2013, compared to $921.2 million for the same period last year or a decrease of $117.7 million, or 12.8%. The decrease was due primarily to the reduction of $128.2 million of fuel and certain engine overhaul amounts which are directly reimbursed by major partners and recorded as operating revenues. Total block hours for the quarter ended March 31, 2013 were 571,991, or an increase of 2.8 percent, compared to 556,421 for the same period last year, which generated approximately $10.5 million in additional revenues.

Total airline expenses (consisting of total operating and interest expenses) decreased $114.6 million, or 12.5%, during the quarter ended March 31, 2013, compared to the same period in 2012. However, after excluding pass-through costs for fuel and certain engine overhaul expenses, total airline expenses increased $4.8 million or less than 1%.

Under United Express agreements for SkyWest Airlines, Inc. (“SkyWest Airlines”) and ExpressJet Airlines, Inc. (“ExpressJet Airlines”), SkyWest recognizes revenue at fixed hourly rates for mature engine maintenance on regional jet engines and SkyWest recognizes engine maintenance expense on its CRJ200 regional jet engines on an as-incurred basis as maintenance expense. During the quarter ended March 31, 2013, CRJ200 engine expense under these agreements decreased $7.6 million to $10.0 million compared to $17.6 million for the quarter ended March 31, 2012, as a result of decreased engine overhaul expense due to the timing of scheduled engine maintenance events. SkyWest was reimbursed approximately $11.4 million and $9.4 million for engine overhaul expense, under its United Express agreements, in each of the periods ended March 31, 2013 and 2012, respectively.

Liquidity

At March 31, 2013, SkyWest had $631.5 million in cash and marketable securities, compared to $709.4 million as of December 31, 2012. The decrease in cash and marketable securities of $77.9 million was primarily the result of the payment of scheduled semi-annual lease and debt payments. SkyWest’s long-term debt was $1.44 billion as of March 31, 2012, compared to $1.47 billion as of December 31, 2012. The decrease in long-term debt 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 4.7% discount rate, the present value of these lease obligations was approximately $1.7 billion as of March 31, 2013.

Recent Business Developments

On August 2, 2012, SkyWest announced the award of 34 additional dual-class aircraft and the removal of 66 CRJ200 aircraft with Delta Airlines, Inc. (“Delta”) and has taken delivery of 33 of these dual-class aircraft. SkyWest anticipates removal of the 66 CRJ200 aircraft starting in October of 2013.

On September 11, 2012, SkyWest announced the signing of an agreement with American Airlines, Inc. (“American Airlines”) to operate 23 CRJ200 regional jet aircraft as American Eagle and had integrated 12 of these aircraft into operations by December 31, 2012. The remaining 11 aircraft were introduced into service February 14, 2013.

On July 11, 2012, SkyWest announced the execution of an Aircraft Purchase Agreement with Mitsubishi Aircraft Corporation covering the purchase of 100 Mitsubishi regional jet aircraft. Deliveries are currently expected to begin in 2016.

SkyWest has increased its total fleet to 752 aircraft as of March 31, 2012, compared to 727 aircraft as of March 31, 2012.

Copyright Photo: Michael B. Ing. SkyWest will start the removal of 66 Bombardier CRJ200 aircraft from the Delta Connection contract starting in October 2013. Bombardier CRJ200 (CL-600-2B19) N408SW (msn 7055) completes its final approach into Los Angeles International Airport.

Delta Connection-SkyWest:

PSA Airlines’ pilots ratify the new contract

PSA Airlines’ (2nd) (US Airways Express) (Dayton), a wholly-owned subsidiary of US Airways (Phoenix), represented by the Air Line Pilots Association (ALPA), have voted to ratify a new five-year collective bargaining agreement that was reached on February 14. The new contract was ratified by the airline’s 515 ALPA-represented pilots who are based in in Dayton, Ohio; Knoxville, Tennessee and Charlotte, North Carolina.

Copyright Photo: Bruce Drum. PSA Airlines’ (2nd) Bombardier CRJ200 (CL-600-2B19) N261PS (msn 7959) climbs away from the Charlotte Douglas International Airport hub.

US Airways Express-PSA Airlines:

Delta to connect Dickinson, ND with the Minneapolis/St. Paul hub

Delta Air Lines (Atlanta) will add two daily flights between Dickinson’s Theodore Roosevelt Regional Airport in Dickinson, North Dakota and Minneapolis-St. Paul International Airport, effective on June 10, 2013.

The new service will be operated by Delta Connection carrier SkyWest Airlines (St. George) using 50-seat Bombardier CRJ200 regional jets. Last year, Delta also added service to Williston, N.D., where the Bakken oil reserves were first discovered.

The new market is growing due to the local expanding gas and oil industry.

Delta’s two daily flights between Dickinson and Minneapolis are scheduled as follows:

Dickinson to Minneapolis-St. Paul

Departs	Arrives	Service Begins
7:45 a.m.	10:19 a.m.	June 10, 2013
11:50 a.m.	2:23 p.m.	June 10, 2013

Minneapolis-St. Paul to Dickinson

Departs	Arrives	Service Begins
10:15 a.m.	11:02 a.m.	June 10, 2013
5:30 p.m.	6:16 p.m.	June 10, 2013

Delta Air Lines:

Delta Connection-SkyWest:

SkyWest to operate St. George-Denver CRJ200 flights for United

SkyWest Airlines (St. George, UT) has announced new United Express service between its St. George, Utah base and the United Airlines Denver, Colorado hub beginning on June 6, 2013. SkyWest will provide once-daily Denver service utilizing its 50-passenger Canadair Regional Jet (Bombardier) CRJ200s.

Copyright Photo: Michael B. Ing. Bombardier CRJ200 (CL-600-2B19) N927SW (msn 7693) climbs away from Los Angeles International Airport.

SkyWest Airlines:

United Express-SkyWest:

SkyWest routes operated for United Airlines:

Please click on the map for the full-size view.

PSA Airlines and ALPA reach a tentative agreement for a new contract

PSA Airlines (2nd) (US Airways Express) (Dayton), a wholly-owned subsidiary of US Airways (Phoenix), has announced that it has reached a tentative agreement with the Air Line Pilots Association (ALPA), which represents the airline’s 515 pilots.

ALPA will be presenting the details of the tentative agreement to its members for a ratification vote in the coming weeks. The tentative agreement would cover the airline’s 515 pilots, who are based in Dayton, Ohio; Knoxville, Tennessee and Charlotte, North Carolina.

US Airways Express-PSA Airlines:

SkyWest rebounds with a 4Q net profit of $13.9 million, $51.1 million net profit in 2012

SkyWest, Inc. (SkyWest Airlines and ExpressJet Airlines) (St. George, UT) today reported net income of $13.9 million, or $0.27 per diluted share, for the quarter ended December 31, 2012, compared to a net loss of $(18.0) million, or $(0.35) per diluted share, for the same period last year.

Quarter Highlights

SkyWest’s operating and financial results for the quarter ended December 31, 2012 reflect a significant improvement compared to the same period of 2011, primarily as a result of recording additional revenues from an increase in block hour production and continuing to reduce its cost structure as part of its profit improvement plan; however, for financial reporting purposes, the increased revenues were offset by lower reimbursement payments for fuel and maintenance overhaul expenses under contracts with SkyWest’s major partners, resulting in a net decrease in total operating revenues. These efforts resulted in a $53.3 million improvement in pretax income and an improvement in fully diluted earnings per share of $0.62 for the quarter ended December 31, 2012, compared to the same period last year. This is the fourth quarter in a row where reported results have exceeded market estimates. Following are some selected highlights for the quarter and twelve months ended December 31, 2012 compared to the same periods last year:

(Unaudited) Dollars in thousands, except per share amounts	Three Months Ended December 31,			Twelve Months Ended December 31,
	2012	2011	% Change	2012	2011	% Change

Total operating revenue	$ 810,725	$ 899,851	(9.9)%	$3,534,372	$3,654,924	(3.3)%
Total operating margin	5.4%	(0.6)%	6.0pts	4.7%	1.1%	3.6pts
Pretax income (loss)	$ 25,556	$ (27,773)	192.0%	$ 85,896	$ (50,170)	271.2%
Net income (loss)	$ 13,946	$ (17,967)	177.6%	$ 51,157	$ (27,335)	287.1%
Fully diluted earnings per share	$ 0.27	$ (0.35)	177.1%	$ 0.99	$ (0.52)	290.4%
Block hours	568,808	550,808	3.3%	2,297,014	2,250,280	2.1%

Commenting on the results, Jerry C. Atkin, SkyWest’s Chairman and CEO, said “We are very pleased with our operating and financial results for the quarter ended December 31, 2012. This is a solid result for a quarter that can typically be very challenging.” He continued, “We continue to make positive progress in our cost reduction efforts that are resulting in improved profits, quarter over quarter.”

Financial and Operating Results

Under certain of SkyWest’s flying contracts, fuel purchased for SkyWest flights has been directly reimbursed by SkyWest’s major partners and, for financial reporting purposes, was included in operating revenues. The majority of fuel is now purchased directly by SkyWest’s major partners and as a result, SkyWest experienced a reduction of $92.5 million in reported operating revenues and operating expenses related directly to fuel purchases by its major partners under its contract flying, for the quarter ended December 31, 2012, compared to the quarter ended December 31, 2011.

Operating revenues totaled $810.7 million for the quarter ended December 31, 2012, compared to $899.9 million for the same period last year or a decrease of $89.2 million, or 9.9%, The decrease was due primarily to the reduction of $115.8 million of fuel and certain engine overhaul amounts which are directly reimbursed by major partners and recorded as operating revenues, offset by an increase in revenues of approximately $27.5 million as a result of additional block hour production and incentive amounts for improvements in completion factors and on-time performance for its flights. Total block hours for the quarter ended December 31, 2012 were 568,808, or an increase of 3.3 percent, compared to 550,808 for the same period last year.

Total airline expenses (consisting of total operating and interest expenses) decreased $139.1 million, or 15.0%, during the quarter ended December 31, 2012, compared to the same period in 2011. However, after excluding pass-through costs for fuel and certain engine overhaul expenses that are directly reimbursed by SkyWest’s major partners, total airline expenses decreased $35.2 million or 4.6%. The decrease was primarily the result of 1) reduced non-pass through maintenance costs of approximately $14.7 million, 2) reduced United Express CRJ200 engine overhaul costs of approximately $8.7 million and 3) reduced customer service labor of approximately $7.9 million due to the elimination of handling of flights at certain airports.

Under United Express agreements for SkyWest Airlines, Inc. (St. George) and ExpressJet Airlines, Inc. (Atlanta) SkyWest recognizes revenue at fixed hourly rates for mature engine maintenance on regional jet engines and SkyWest recognizes engine maintenance expense on its CRJ200 regional jet engines on an as-incurred basis as maintenance expense. During the quarter ended December 31, 2012, CRJ200 engine expense under these agreements decreased $8.7 million to $10.6 million compared to $19.3 million for the quarter ended December 31, 2011, as a result of decreased engine overhaul expense due to the timing of scheduled engine maintenance events. SkyWest was reimbursed approximately $10.3 million and $8.9 million for engine overhaul expense, under its United Express agreements, in each of the periods ended December 31, 2012 and 2011, respectively.

Liquidity

At December 31, 2012, SkyWest had $709.4 million in cash and marketable securities, compared to $646.5 million as of December 31, 2011. The increase in cash and marketable securities of $62.9 million was primarily the result of increased profitability for the twelve-month period ended December 31, 2012. SkyWest’s long-term debt was $1.47 billion as of December 31, 2012, compared to $1.61 billion as of December 31, 2011. The decrease in long-term debt 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 4.7% discount rate, the present value of these lease obligations was approximately $1.8 billion as of December 31, 2012.

Recent Business Developments

SkyWest (Delta Connection) recently announced the award of 34 additional dual-class aircraft and the removal of 66 CRJ200 aircraft with Delta Airlines, Inc. (Atlanta) and has taken delivery of 20 of these dual-class aircraft by December 31, 2012. The remaining 14 aircraft have planned delivery dates between January and May 2014. SkyWest anticipates removal of the 66 CRJ200 aircraft starting in October of 2013.

SkyWest also recently announced the signing of an agreement with American Airlines, Inc. (Dallas/Fort Worth) to operate 23 Bombardier CRJ200 regional jet aircraft as American Eagle and had integrated 12 of these aircraft into operations by December 31, 2012. The remaining 11 aircraft have been introduced into service February 14, 2013.

SkyWest recently announced the execution of an Aircraft Purchase Agreement with Mitsubishi Aircraft Corporation covering the purchase of 100 Mitsubishi regional jet aircraft. Deliveries are currently expected to begin in 2016.

SkyWest has increased its total fleet to 744 aircraft as of December 31, 2012, compared to 732 aircraft as of December 31, 2011.

Copyright Photo: Michael B. Ing. SkyWest Airlines now has 23 Bombardier CRJ200 regional jets in operation for American Airlines as an American Eagle Carrier. Unfortunately for SkyWest, the newly painted aircraft will have to be painted in the new American Eagle livery. CRJ200 (CL-600-2B19) N464SW (msn 7827) climbs away from Los Angeles International Airport.

American Eagle-SkyWest:

American Eagle-SkyWest Route Map: The American Eagle operation is based in Los Angeles.