Business Wire | Jul 29, 2021 04:02PM EDT

SkyWest, Inc. Announces Second Quarter 2021 Profit

Jul. 29, 2021

ST. GEORGE, Utah--(BUSINESS WIRE)--Jul. 29, 2021--SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for Q2 2021, including net income of $62 million, or $1.22 per diluted share, compared to a net loss of $26 million, or $0.51 per share, for Q2 2020. The financial results improved from Q2 2020 due to the flying demand recovery from COVID-19.

The pre-tax results for Q2 2021 and Q2 2020 included $114 million and $152 million, respectively, in payroll support program grants received from the U.S. Treasury Department ("Treasury") reflected as a reduction to operating expenses.

Commenting on the results, Chip Childs, Chief Executive Officer of SkyWest, said, "We are pleased to see continued demand improvement and look forward to returning to pre-COVID levels by the beginning of 2022. We are excited to resume new aircraft deliveries in the third quarter, with 29 new E175 aircraft by the first half of 2023. I want to thank our exceptional SkyWest team for their commitment to excellence through these dynamic and challenging circumstances."

Financial Results

Revenue was $657 million in Q2 2021, up from $350 million in Q2 2020, or 88%, as SkyWest's Q2 2021 block hours on completed flights were up 157% from Q2 2020. Revenue in Q2 2021 was down $87 million, or 12%, from Q2 2019 (pre-COVID) and completed block hours in Q2 2021 were down 13% from Q2 2019. SkyWest also provided temporary rate reductions to its major airline partners under its flying contracts during Q2 2021 and Q2 2020 in response to the COVID-19 demand disruption impact to its partners.

SkyWest deferred recognizing revenue on $6 million of fixed monthly payments received during Q2 2021 compared to $69 million of deferred fixed monthly payments received during Q2 2020. SkyWest will recognize the aggregate $138 million of deferred revenue from the fixed monthly payments on a per-completed, block hour basis over the remaining contract terms.

Operating expenses were $542 million in Q2 2021, up from $354 million in Q2 2020, or 53%. The increase in operating expenses was due to an increase in flights operated in Q2 2021 compared to the same period in 2020. SkyWest recognized $114 million in payroll support program grants received from Treasury in Q2 2021 under the payroll support program extension agreement ("PSP2") and payroll support program 3 agreement ("PSP3") as a reduction to operating expenses, compared to $152 million recognized in Q2 2020 received under the initial payroll support program agreement. Operating expenses were down $58 million, or 10%, from Q2 2019 (pre-COVID).

Capital and Liquidity

SkyWest had $956 million in cash and marketable securities at June 30, 2021, up from $826 million at December 31, 2020.

During Q2 2021 SkyWest repaid its $60 million secured loan with Treasury received under the CARES Act, and in connection with such repayment, terminated the secured loan agreements that provided up to $725 million of available borrowing with Treasury. As a result of the repayment, Treasury released $1.5 billion in collateral that consisted of aircraft engines and aircraft parts.

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 June 30, 2021.

As previously announced, SkyWest entered into PSP3 with Treasury in April 2021 and received total proceeds of $250 million during Q2 2021. In consideration for the funding, approximately $45 million was in the form of a ten-year, low-interest unsecured term loan and SkyWest issued to Treasury warrants to purchase 78,317 shares of SkyWest common stock at a strike price of $57.47. 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 Treasury warrants to purchase an additional 25,958 shares of SkyWest common stock at a strike price of $40.41.

Total debt at June 30, 2021 was $3.0 billion, down from $3.2 billion at December 31, 2020. Capital expenditures during Q2 2021 were $16 million for the purchase of two used CRJ700 aircraft, spare engines 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. The anticipated future delivery dates summarized below are based on currently available information and are subject to change.

Flying contract with Alaska Airlines ("Alaska") for nine E175 aircraft

* Eight aircraft deliveries are anticipated in 2022 and one aircraft delivery is anticipated in the first half of 2023. The aircraft are scheduled to be placed into service in 2022 and 2023. * SkyWest anticipates financing the aircraft through debt.

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 six used CRJ700s in service during Q2 2021. * SkyWest anticipates placing ten used CRJ700s into service during the second half of 2021, resulting in 90 CRJ700s in service with American by the end of 2021. * As announced today, SkyWest anticipates placing eleven additional used CRJ700s into service between late 2022 and mid-2023, resulting in 101 CRJ700s in service with American by mid-2023.

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 450 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 21 million passengers in 2020 and 43 million passengers in 2019.

SkyWest will host its conference call to discuss its second quarter 2021 results today, July 29, 2021, at 2:30 p.m. Mountain Time. The conference call number is 1-866-982-4145 for domestic callers, and 1-873-415-0275 for international callers. Please call up to ten minutes in advance to ensure you are connected prior to the start of the call. The conference call will also be available live on the Internet at https://event.on24.com/wcc/r/3312359/88B00D4CAB82532E2EEC5DAF486F8926. This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the second quarter 2021 results call, participation at investor conferences and investor presentations can be accessed at inc.skywest.com.

Forward Looking-Statements

In addition to historical information, this release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "forecasts," "expects," "intends," "believes," "anticipates," "estimates," "should," "likely" and similar expressions identify forward-looking statements. Such statements include, but are not limited to, statements about the impact of the COVID-19 outbreak on SkyWest's business, financial condition and results of operations, the scheduled aircraft deliveries for SkyWest in upcoming years, and related removal from service and/or placement into service of certain aircraft, the return to pre-COVID production levels and expected timing thereof, SkyWest's coordination with major airline partners to optimize the delivery of aircraft under previously announced deals, the expected terms, timing and benefits related to SkyWest's leasing and joint venture transactions, as well as SkyWest's future financial and operating results, plans, objectives, expectations, estimates, intentions and outlook, and other statements that are not historical facts. 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 statements unless required by law. Readers should note that many factors could affect the future operating and financial results of SkyWest 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, uncertainties regarding the impact of the PSP2 funding, PSP3 funding and loans on SkyWest's business and operations, the continued uncertainty of the duration, scope and impact of COVID-19, a further spread or worsening of COVID-19, the consequences of the COVID-19 outbreak to economic conditions, the travel industry and our major partners in general and the financial condition and operating results of SkyWest in particular, the prospects of entering into agreements with existing or other carriers to fly new aircraft, ongoing negotiations between SkyWest and its major partners regarding their contractual obligations, uncertainties regarding operation of new aircraft, the ability to attract and retain qualified pilots, the impact of regulatory issues such as pilot rest rules and qualification requirements, and the ability to obtain aircraft financing.

Actual operational and financial results of SkyWest will likely 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 existing global COVID-19 pandemic and the outbreak of any other disease or similar public health threat that affects travel demand or travel behavior; 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, including related to the duration and impact of the COVID-19 pandemic, and related decreases in customer demand and spending; the financial stability of SkyWest's major partners and any potential impact of their financial condition on the operations of SkyWest; fluctuations in flight schedules, which are determined by the major partners for whom SkyWest conducts flight operations; variations in market and economic conditions; significant aircraft lease and debt commitments; estimated useful life of long-lived assets, residual aircraft values and related impairment charges; labor relations and costs; the impact of global instability; rapidly fluctuating fuel costs, and 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 materially from management's current expectations are contained in SkyWest's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports that the Company files with the Securities and Exchange Commission may be further amplified by the global impact of the COVID-19 pandemic.

SkyWest, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Dollars and Shares in Thousands, Except per Share Amounts)

(Unaudited)





Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

OPERATING REVENUES:

Flying agreements $ 632,967 $ 336,370 $ 1,144,158 $ 1,045,864

Lease, airportservices and 24,023 13,669 47,387 34,111 other

Total operating 656,990 350,039 1,191,545 1,079,975 revenues



OPERATING EXPENSES:

Salaries, wages 233,423 170,218 453,265 419,379 and benefits

Aircraftmaintenance, 190,879 121,289 394,706 281,505 materials andrepairs

Depreciation and 109,895 131,638 219,492 243,346 amortization

Airport-related 22,038 21,550 46,486 52,190 expenses

Aircraft fuel 25,867 6,821 45,061 32,234

Aircraft rentals 15,723 16,697 31,213 33,752

Payroll support (114,144 ) (151,938 ) (307,317 ) (151,938 )grant

Other operating 58,286 38,167 112,774 107,589 expenses

Total operating 541,967 354,442 995,680 1,018,057 expenses

OPERATING INCOME 115,023 (4,403 ) 195,865 61,918 (LOSS)



OTHER INCOME (EXPENSE):

Interest income 210 1,685 494 4,249

Interest expense (33,940 ) (30,926 ) (65,294 ) (61,130 )

Other income, net 80 402 296 800

Total other (33,650 ) (28,839 ) (64,504 ) (56,081 )expense, net



INCOME (LOSS)BEFORE INCOME 81,373 (33,242 ) 131,361 5,837 TAXES

PROVISION(BENEFIT) FOR 19,379 (7,527 ) 33,467 1,564 INCOME TAXES

NET INCOME (LOSS) $ 61,994 $ (25,715 ) $ 97,894 $ 4,273



BASIC EARNINGS $ 1.23 $ (0.51 ) $ 1.95 $ 0.09 (LOSS) PER SHARE

DILUTED EARNINGS $ 1.22 $ (0.51 ) $ 1.93 $ 0.08 (LOSS) PER SHARE



Weighted average common shares:

Basic 50,346 50,140 50,316 50,208

Diluted 50,725 50,140 50,727 50,357

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)

June 30,

December 31,

2021

2020

Cash and marketable securities

$

955,675

$

825,908

Other current assets

175,158

156,894

Total current assets

1,130,833

982,802

Property and equipment, net

5,194,282

5,330,423

Deposits on aircraft

90,044

31,625

Other long-term assets

576,604

542,772

Total assets

$

6,991,763

$

6,887,622

Current portion, long-term debt

$

360,968

$

402,158

Other current liabilities

748,390

539,564

Total current liabilities

1,109,358

941,722

Long-term debt, net of current maturities

2,652,262

2,801,538

Other long-term liabilities

981,238

1,004,817

Stockholders' equity

2,248,905

2,139,545

Total liabilities and stockholders' equity

$

6,991,763

$

6,887,622

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)



June 30, December 31,

2021 2020

Cash and marketable securities $ 955,675 $ 825,908

Other current assets 175,158 156,894

Total current assets 1,130,833 982,802



Property and equipment, net 5,194,282 5,330,423

Deposits on aircraft 90,044 31,625

Other long-term assets 576,604 542,772

Total assets $ 6,991,763 $ 6,887,622



Current portion, long-term debt $ 360,968 $ 402,158

Other current liabilities 748,390 539,564

Total current liabilities 1,109,358 941,722



Long-term debt, net of current maturities 2,652,262 2,801,538

Other long-term liabilities 981,238 1,004,817

Stockholders' equity 2,248,905 2,139,545

Total liabilities and stockholders' equity $ 6,991,763 $ 6,887,622

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)

SkyWest's fleet in scheduled service by aircraft type:

June 30, 2021

December 31, 2020

June 30, 2020

E175 aircraft

193

193

189

CRJ900 aircraft

40

39

43

CRJ700 aircraft

104

90

86

CRJ200 aircraft

141

130

153

Total aircraft in service

478

452

471

As of June 30, 2021, SkyWest leased 34 CRJ700s and five CRJ900s to third parties (these aircraft are excluded from the table above).

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)



SkyWest's fleet in scheduled service by aircraft type:



June 30, 2021 December 31, 2020 June 30, 2020

E175 aircraft 193 193 189

CRJ900 aircraft 40 39 43

CRJ700 aircraft 104 90 86

CRJ200 aircraft 141 130 153

Total aircraft in service 478 452 471

As of June 30, 2021, SkyWest leased 34 CRJ700s and five CRJ900s to third parties (these aircraft are excluded from the table above).

Selected operational data:



For the three months ended June 30, For the six months ended June 30,

Blockhours by 2021 2020 % Change 2021 2020 % Changeaircrafttype:

E175s 149,226 61,455 142.8 % 277,724 194,134 43.1 %

CRJ900s 29,713 3,433 765.5 % 53,719 32,353 66.0 %

CRJ700s 73,380 30,666 139.3 % 136,475 98,740 38.2 %

CRJ200s 71,726 30,472 135.4 % 132,309 158,022 (16.3 )%

Totalblock 324,045 126,026 157.1 % 600,227 483,249 24.2 %hours





Departures 185,498 80,755 129.7 % 340,392 290,038 17.4 %

Adjustedflight 99.9 % 99.9 % - pts 99.9 % 99.9 % - ptscompletion

Raw flight 99.5 % 99.7 % (0.2 ) 98.5 % 96.4 % 2.1 ptscompletion pts

Passengers 9,301,873 1,802,327 416.1 % 15,010,462 10,666,833 40.7 %carried

Passengerload 76.4 % 34.4 % 42.0 pts 67.6 % 58.0 % 9.6 ptsfactor

Averagetrip 533 487 9.4 % 536 492 8.9 %length

Adjusted flight completion percent excludes weather cancellations. Raw flight completion includes weather cancellations.

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CONTACT: Investor Relations 435.634.3200 Investor.relations@skywest.com

CONTACT: Corporate Communications 435.634.3553 corporate.communications@skywest.com