Second Quarter Highlights:
Net income of $88 million, or $1.71 per diluted share, up from $76 million, or $1.43 per diluted share in Q2 2018
Pre-tax income of $115 million, up from $98 million in Q2 2018
Placing ten used CRJ700s into a flying contract with American Airlines beginning early 2020
SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported financial and operating results for Q2 2019, including net income of $88 million, or $1.71 per diluted share, compared to net income of $76 million, or $1.43 per diluted share, for Q2 2018. Pre-tax income in Q2 2019 was $115 million, a 17% increase from Q2 2018 primarily due to SkyWest's ongoing fleet transition. SkyWest has added 25 new E175 aircraft and 11 new CRJ900 aircraft since Q2 2018 and has reduced aircraft ownership costs through early lease buyouts on 52 aircraft executed in early 2019.
Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said, "This quarter we were pleased to demonstrate our ability to deploy capital and unlock growth opportunities within our partners' existing scope constraints. I want to thank our outstanding SkyWest professionals for the service they provide to our customers."
Revenue was $744 million in Q2 2019, down from $806 million in Q2 2018 due to the sale of ExpressJet Airlines ("ExpressJet") in January 2019. Excluding ExpressJet revenue in Q2 2018, Q2 2019 revenue increased $82 million, primarily from adding 36 new aircraft since Q2 2018.
Operating expenses were $600 million in Q2 2019, down from $679 million in Q2 2018 also due to the sale of ExpressJet. Excluding ExpressJet operating expenses in Q2 2018, Q2 2019 operating expenses increased $70 million, primarily from growth in operations as a result of additional aircraft placed into service since Q2 2018 and from higher labor costs.
Flying contract updates
SkyWest announced an agreement with American Airlines ("American") to place ten used CRJ700s under a multi-year contract beginning early 2020. SkyWest anticipates acquiring seven CRJ700 aircraft from a third party and internally sourcing three CRJ700 aircraft through upcoming scheduled contract expirations.
Delivery update on new aircraft for Delta
E175 aircraft to be financed by SkyWest and operated by SkyWest:
Four aircraft delivered in Q2 2019
Four aircraft scheduled for delivery in mid-2020
SkyWest expects to remove four CRJ900 aircraft under its Delta agreement in 2020 and to return those aircraft to the lessor. SkyWest has previously removed five CRJ900s from service under its agreement with Delta and is leasing these five aircraft to a third party under a six-year term.
CRJ900 aircraft to be financed by Delta and operated by SkyWest for Delta:
Three aircraft delivered in Q2 2019
One aircraft scheduled for delivery in Q3 2019
Eight aircraft scheduled for delivery in 2020
SkyWest expects to remove a used CRJ700 from its contract with Delta as each of these CRJ900 financed by Delta is placed into service. As previously announced, SkyWest anticipates transitioning the CRJ700s removed under this arrangement with Delta to an agreement with American.
Lease agreement with a third party for 29 CRJ700 aircraft
SkyWest placed one of 29 CRJ700 aircraft under a previously announced lease agreement to a third party for a ten-year term during Q2 2019. SkyWest anticipates the remaining aircraft will be placed under lease in increments through mid-2020.
Capital and Liquidity
SkyWest had $550 million in cash and marketable securities at June 30, 2019, up from $544 million at March 31, 2019. During the second quarter of 2019, SkyWest:
Used $35 million to repurchase stock under SkyWest's $250 million share repurchase program
Used $14 million toward the purchase of four E175 aircraft (total capital expenditure of $88 million on the acquired aircraft including debt issued)
Used $23 million for other capital investments, primarily related to spare engines, aircraft parts and maintenance assets, net of proceeds from sale of fixed assets
Total debt at June 30, 2019 and March 31, 2019 was $3.1 billion. Q2 2019 ending debt balance included debt issued for four E175 aircraft acquired during the quarter, offset by principal payments.