EX-99.1 2 a04-8060_1ex99d1.htm EX-99.1

EXHIBIT 99.1

 

 

NEWS RELEASE

 

For Further Information Contact:

Michael J. Kraupp

Vice President Finance and Assistant Treasurer

Telephone:  (435) 634-3212

Fax:  (435) 634-3205

 

FOR IMMEDIATE RELEASE:  July 21, 2004

 

SKYWEST ANNOUNCES SECOND QUARTER 2004 EARNINGS

 

St. George, Utah—SkyWest, Inc. (NASDAQ: SKYW) today reported operating revenues of $267.4 million for the quarter ended June 30, 2004, a 25.7% increase, compared to $212.7 million for the same period last year.  The Company also reported net income of $20.1 million for the quarter ended June 30, 2004, or $0.34 per diluted share, compared to $14.9 million of net income or $0.26 per diluted share for the same period last year.  The primary items of significance affecting the second quarter of 2004 are outlined below:

 

Total operating revenues for the second quarter of 2004 increased primarily as a result of a 27.2% increase in available seat miles (ASMs) offset by a 1.3% reduction in revenue per available seat mile. The 1.3% reduction in revenue per available seat mile resulted principally from flying a greater percentage of regional jet aircraft than in the prior period.

 

Total operating expenses per ASM for the second quarter of 2004, excluding fuel charges (which are primarily reimbursable by the Company’s major partners), of $53.6 million or $0.031 per ASM, decreased approximately 8.8% to $0.104 from $0.114 for the same quarter of 2003, primarily as a result of the cost reduction initiatives implemented by the Company during 2003.  Additionally, the decrease was due to the addition of 25 new regional jet aircraft since June 30, 2003 and the timing of maintenance events related to these aircraft.

 

Total ASMs for the second quarter of 2004 increased 27.2% from the second quarter of 2003, primarily as a result of the Company increasing its fleet size to 191 aircraft as of June 30, 2004, from 167 aircraft as of June 30, 2003.  During the quarter, the Company took delivery of four new regional jet aircraft consisting of two 50-seat aircraft and two 70-seat aircraft.  At June 30, 2004, the Company’s fleet consisted of 118 regional jets (56 Delta and 62 United) and 73 EMB-120 aircraft (49 United, 15 Delta and 9 Continental).  During the second quarter of 2004, the Company generated 1.75 billion ASMs, compared to 1.38 billion ASMs during the same period of 2003.

 

 

On February 10, 2004, the Company announced the completion of a firm order for 12 additional Bombardier regional jet aircraft.  The order consists of 10, 50-seat aircraft and two 70-seat aircraft.  As a result of its firm orders for aircraft, the Company currently anticipates that it will take delivery of 17, 70-seat aircraft and 12, 50-seat aircraft during 2004.  Management also currently anticipates that due to these projected deliveries during 2004, the Company’s annual ASMs will increase by approximately 28% from the 2003 production to approximately 7.5 billion.  Additionally, the Company has obtained lease financing commitments for all aircraft to be delivered during 2004.

 

During the quarter ended March 31, 2004, the Company and Delta Air Lines agreed conceptually on the rates, terms and conditions to be included in the agreement which is intended to govern the Company’s Delta Connection operations for 2004 and future periods.  The Company and Delta Air Lines are currently negotiating a definitive agreement setting forth those rates, terms and conditions. Management anticipates that the definitive agreement will include multiple year rate reset provisions and address the possibility of contract extensions through 2014. Management also expects that the definitive agreement will include other provisions intended to enable more efficient contract administration for the parties.

 

Delta Air Lines previously announced that SkyWest was awarded seven additional 50-seat regional jet aircraft that are scheduled for delivery during the first half of 2005.  As a result of this announcement, the Company currently anticipates that SkyWest will operate 63, 50-seat regional jets in its Delta Connection operations by mid 2005.

 

On June 2, 2004, the Company announced the opening of a new maintenance base and crew domicile in Colorado Springs, Colorado, effective August 1, 2004 and will be fully operational by December 2004.  The Company will lease a hangar on the airport grounds while plans are being developed to build a new on-site facility.   The Company’s maintenance personnel will provide various overnight maintenance functions for the airline’s fleet of 50-seat and 70-seat Bombardier regional jets.  It is anticipated that the Company will eventually employ 135 maintenance personnel and up to 150 crew members.

 

At June 30, 2004, the Company had approximately $477.2 million in cash and marketable securities compared to $480.4 million as of December 31, 2003.  During the quarter, the Company took delivery of four new regional jet aircraft from Bombardier, consisting of two 50-seat aircraft and two 70-seat aircraft and entered into interim financing arrangements for these aircraft. Additionally, during the quarter the Company refinanced two previous interim financing arrangements for 70-seat aircraft with long-term permanent lease financing.  The Company’s long-term debt increased to $479.9 million as of June 30, 2004, compared to $462.8 million at December 31, 2003, consistent with entering into two long-term debt arrangements on two 50-seat aircraft delivered in January 2004.  The Company has significant long-term lease obligations that are recorded as operating leases and are not reflected as liabilities on the Company’s consolidated balance sheets.  At a 7.0% discount factor, the present value of these lease obligations was approximately $1.2 billion as of June 30, 2004.

 

Under the Company’s United Express agreement, specific amounts are included in the rates charged for mature maintenance on regional jet aircraft engines that the Company records as revenue.  However, consistent with the change to a time and material maintenance policy, as more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, as amended, the Company records maintenance expense on its regional jet aircraft engines as the maintenance events occur. As a result, during the second quarter of 2004, the Company has collected and recorded as revenue $5.50 million (pretax) under its United Express agreement with no corresponding offset for regional jet engine maintenance overhauls since there were none incurred.

 

In addition to historical information, this release contains forward-looking statements.  “The Company” may, from time-to-time, make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements encompass the Company’s beliefs, expectations, hopes or intentions regarding future events.  Words such as “expects,” “intends,” “believes,” “anticipates,” “should,” “likely” and similar expressions identify forward-looking statements.  All forward-looking statements included in this release are made as of the date hereof and are based on information available to the Company as of such date.  The Company assumes no obligation to update any forward-looking statement. Actual results will vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of reasons, including, among others: developments associated with fluctuations in the economy and the demand for air travel; bankruptcy

 

 

proceedings involving United Airlines, Inc.; ongoing negotiations between the Company and its major partners regarding their contractual relationships; variations in market and economic conditions; employee relations and labor costs; the degree and nature of competition; SkyWest’s ability to expand services in new and existing markets and to maintain profit margins in the face of pricing pressures; aircraft deliveries and the Company’s ability to obtain financing; and other unanticipated factors.  Risk factors, cautionary statements and other conditions which could cause actual results to differ from the Company’s current expectations are contained in the Company’s filings with the Securities and Exchange Commission, including the section of the Company’s Annual Report 10-K, as amended, entitled “Factors That May Affect Future Results.”

 

SkyWest Airlines was named the number one on-time airline in the United States by the Department of Transportation for 2003, a year in which it carried 10.7 million passengers. SkyWest operates as United Express, Delta Connection and Continental Connection carriers under contractual agreements with United Airlines and Delta Air Lines, and under a marketing agreement with Continental Airlines.  System-wide, SkyWest serves a total of 116 cities in 31 states and three Canadian provinces with more than 1,300 daily departures.  This press release and additional information regarding SkyWest can be accessed at www.skywest.com.

 

(more)

 

 

SKYWEST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

Operating revenues:

 

 

 

 

 

 

 

 

 

Passenger

 

$

262,221

 

$

211,498

 

$

512,875

 

$

417,316

 

Ground handling and other

 

5,166

 

1,196

 

8,216

 

2,740

 

 

 

267,387

 

212,694

 

521,091

 

420,056

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Flying operations

 

131,002

 

98,444

 

250,697

 

203,291

 

Customer service

 

42,434

 

33,564

 

83,981

 

67,711

 

Maintenance

 

24,415

 

19,474

 

48,912

 

35,738

 

Depreciation and amortization

 

19,000

 

18,977

 

38,227

 

35,335

 

General and administrative

 

14,196

 

12,684

 

26,986

 

23,534

 

Promotion and sales

 

1,181

 

5,299

 

2,272

 

10,046

 

 

 

232,228

 

188,442

 

451,075

 

375,655

 

Operating income

 

35,159

 

24,252

 

70,016

 

44,401

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest income

 

2,184

 

2,651

 

4,080

 

5,570

 

Interest expense

 

(3,920

)

(2,484

)

(8,389

)

(3,748

)

 

 

(1,736

)

167

 

(4,309

)

1,822

 

Income before income taxes

 

33,423

 

24,419

 

65,707

 

46,223

 

Provision for income taxes

 

13,369

 

9,523

 

26,283

 

18,027

 

Net income

 

$

20,054

 

$

14,896

 

$

39,424

 

$

28,196

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.35

 

$

0.26

 

$

0.68

 

$

0.49

 

Diluted earnings per share

 

$

0.34

 

$

0.26

 

$

0.67

 

$

0.49

 

Weighted average common shares:

 

 

 

 

 

 

 

 

 

Basic

 

58,056

 

57,648

 

58,032

 

57,644

 

Diluted

 

58,595

 

57,974

 

58,614

 

57,844

 

 

Unaudited Operating Highlights

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

Operating Highlights

 

2004

 

2003

 

% Change

 

2004

 

2003

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Passengers carried

 

3,157,318

 

2,563,561

 

23.2

 

6,041,840

 

4,834,732

 

25.0

 

Revenue passenger miles (000)

 

1,288,702

 

991,552

 

30.0

 

2,452,438

 

1,887,428

 

29.9

 

Available seat miles (000)

 

1,754,698

 

1,379,789

 

27.2

 

3,421,376

 

2,685,643

 

27.4

 

Passenger load factor

 

73.4

%

71.9

%

1.5

pts

71.7

%

70.3

%

1.4

pts

Passenger breakeven load factor

 

64.9

%

64.5

%

0.4

pts

63.2

%

63.5

%

(0.3

)pts

Yield per revenue passenger mile

 

0.203

 

0.213

 

(4.7

)

0.209

 

0.221

 

(5.4

)

Revenue per available seat mile

 

0.152

 

0.154

 

(1.3

)

0.152

 

0.156

 

(2.6

)

Cost per available seat mile

 

0.135

 

0.138

 

(2.2

)

0.134

 

0.141

 

(5.0

)

Fuel cost per available seat mile

 

0.031

 

0.025

 

2.4

 

0.029

 

0.027

 

0.7

 

Average passenger trip length

 

408

 

387

 

5.4

 

406

 

390

 

4.1