ST. GEORGE, Utah, April 28, 2016 /PRNewswire/ — SkyWest, Inc. (NASDAQ: SKYW) today reported financial and operating results for the first quarter of 2016, including net income of $27 million or $0.52 per diluted share, up from net income of $10 million or $0.18 per diluted share in Q1 2015. Pre-tax income for the first quarter of 2016 was $45 million compared to $16 million in Q1 2015.
Operating income was $62 million, or 8.1% in operating margin, for the first quarter of 2016, compared to $34 million, or 4.5% in operating margin, in Q1 2015. The improvement in operating margin was primarily due to new aircraft added to profitable flying contracts, economic improvements from fleet transition and certain existing flying contracts, additional financial incentives earned through improved operating performance and a reduction in the number of aircraft operating under unprofitable or less-profitable flying contracts.
Commenting on the results, Chip Childs, SkyWest, Inc. Chief Executive Officer, said “The quarter’s strong results reflect the value SkyWest has been able to generate for our partners through solid, reliable operating performance. The demand for our service and aircraft is strong and we remain focused on continuing to drive incremental improvement in fleet economics to create long-term value for our stakeholders. The quarter’s performance is a huge credit to our 20,000 professionals who deliver a quality product to our passengers and major airline partners.”
Q1 2016 Financial Highlights
Revenue was $762 million in Q1 2016, up $2 million from Q1 2015. The increase in revenue included the net impact of 29 aircraft added to profitable flying agreements and the removal of 66 aircraft from unprofitable or less-profitable flying agreements since Q1 2015. Q1 2016 revenue also reflected rate increases under certain existing SkyWest flying contracts, additional flying under pro-rate arrangements, and higher contract performance incentives earned compared to Q1 2015.
Operating expenses were $700 million in Q1 2016, down by $26 million from Q1 2015. This improvement primarily related to lower direct operating costs from fewer aircraft in service, a reduction in fuel costs, maintenance cost savings initiatives, partially offset by additional crew training costs in anticipation of scheduled Embraer E175 aircraft (“E175”) deliveries.
Under its fleet transition plan, SkyWest generated approximately 24,000 additional block hours, or a 14% increase, with its dual-class aircraft (E175s and CRJ700s/900s) during Q1 2016, compared to Q1 2015. SkyWest had a reduction of approximately 54,000 block hours, or a 16% decrease, with its 50-seat and smaller aircraft (ERJ145s/135s, CRJ200s and EMB120s) during Q1 2016, compared to Q1 2015.
SkyWest reached an agreement with Alaska to take delivery of five additional E175 aircraft in 2017, resulting in a total of 20 E175 aircraft expected to be in service with Alaska by the second half of 2017.
Q1 2016 Capital and Liquidity Update
SkyWest had $442 million in cash and marketable securities at March 31, 2016, a decrease of $56 million from December 31, 2015. SkyWest made $35 million in scheduled semi-annual aircraft lease pre-payments during Q1 2016. SkyWest issued $68 million in new long-term debt during Q1 2016 to finance the three new E175s delivered during the quarter. Total debt, net of principal payments, increased by $11 million during the quarter.
In the first quarter of 2016, SkyWest made capital investments of $30 million: $12 million in equity toward the purchase of three E175 aircraft, $5 million for a related spare engine, and $13 million in other capital expenditures.
For the second quarter of 2016, SkyWest estimates capital investments of $50 million: $32 million in equity toward the purchase of eight E175 aircraft, $5 million for a related spare engine, and $13 million in other capital expenditures.
SkyWest to op. 5 more E-175 on Alaska Airlines behalf
