SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for the second quarter of 2017, including net income of $50 million, or $0.95 per diluted share, compared to net income of $40 million, or $0.77 per diluted share for Q2 2016. The improvement in net income over Q2 2016 was primarily due to SkyWest's continued fleet transition, including the addition of 47 new E175s, and the removal of 51 ERJ145s and 18 CRJ200s since Q2 2016. Additionally, since Q2 2016, SkyWest transitioned 49 CRJ700s from other major airline partners to American Airlines, Inc. ("American") under a previously announced multi-year agreement, further reducing fleet risk.
Commenting on the results, Chip Childs, Chief Executive Officer of SkyWest, said "Our results reflect strong production, solid operating performance and ongoing fleet transition improvements. We will continue our disciplined strategy to pursue opportunities that will further improve our business model. None of this is possible without our outstanding professionals, and I want to thank them for the work they do each day to provide an excellent product to our customers."
Q2 2017 Financial Highlights
Revenue was $810 million in Q2 2017, up from $801 million in Q2 2016. The increase in revenue included the net impact of adding 47 new E175 aircraft since Q2 2016, partially offset by the removal of 76 unprofitable or less profitable aircraft over the same period, including 51 ERJ145s, 18 CRJ200s and seven CRJ700s.
Operating expenses were $703 million in Q2 2017, down from $717 million in Q2 2016. The decrease was primarily due to lower direct operating costs from 29 fewer aircraft in service and a 5% reduction in block hour production, partially offset by higher crew training costs associated with the new E175 aircraft deliveries.
Q2 2017 Operational Update
SkyWest Airlines, Inc. ("SkyWest Airlines") took delivery of ten E175s during Q2 2017. SkyWest Airlines anticipates adding one additional E175 aircraft in Q4 2017, resulting in a total of 104 E175 aircraft by the end of 2017.
During Q2 2017, SkyWest Airlines and ExpressJet Airlines, Inc. ("ExpressJet") completed the previously announced transition of 49 CRJ700s to American under a multi-year contract. The 49 CRJ700s in service with American were previously operated by SkyWest Airlines or ExpressJet with other major airline partners.
SkyWest Airlines pilots voted in favor of a four-year extension to their current pay agreement, with the new agreement effective July 2017 through mid-2022. The new agreement provides additional compensation for SkyWest Airlines pilots, primarily in profit sharing and 401(k) match. The financial terms of the agreement were not disclosed. SkyWest Airlines anticipates the new agreement will allow it to continue to provide outstanding pilot careers, meet its mainline partners' needs and provide better visibility for long-term growth opportunities.
Flight completion rates at SkyWest Airlines and ExpressJet for Q2 2017 and Q2 2016 are summarized as follows:
Q2 2017 Capital and Liquidity
SkyWest had $635 million in cash and marketable securities at June 30, 2017, up $70 million from December 31, 2016 and up $48 million from March 31, 2017. During the second quarter of 2017, SkyWest used $15 million in cash and $25 million in previously paid deposits toward the purchase of ten E175 aircraft. SkyWest did not repurchase any stock this quarter under its $100 million share repurchase program of which $90 million remains authorized.
SkyWest issued $227 million in long-term debt during Q2 2017 to finance ten E175s delivered during the quarter. Total debt increased by $145 million during the second quarter of 2017 from the new E175 aircraft acquired, net of scheduled principal payments.
In Q2 2017, excluding aircraft purchased, SkyWest used $21 million for other capital investments, including spare engines and aircraft parts.