Skywest, inc. announces first quarter 2023 results
St. george, utah--(business wire)--skywest, inc. (nasdaq: skyw) (“skywest”) today reported financial and operating results for q1 2023, including net loss of $22 million, or $0.45 loss per share, compared to net income of $18 million, or $0.35 earnings per diluted share, for q1 2022. commenting on the results, chip childs, chief executive officer of skywest, said, “we are making solid headway in our production and performance objectives. we continue to experience exceptionally high demand for our products and appreciate the ongoing engagement from each of our partners. i also want to thank our people for their great work in delivering both an outstanding product and exceptional reliability through the challenging first quarter.” during q1 2023, skywest repurchased 5.1 million shares of common stock for $100 million, which represented 10% of skywest’s outstanding shares as of december 31, 2022. the shares were repurchased under skywest’s previously announced share repurchase program. additionally during q1 2023, skywest acquired 24 crj700 aircraft and eight crj200 aircraft under an early lease buyout for $125 million. pursuant to this transaction, skywest avoids making future lease and lease return cash payments of approximately $90 million, and skywest now owns these aircraft and engines. financial results revenue was $692 million in q1 2023, down $43 million, or 6%, from $735 million in q1 2022. skywest deferred recognizing $63 million of revenue during q1 2023 compared to recognizing previously deferred revenue of $11 million during q1 2022. the increase in deferred revenue during q1 2023 was driven by the terms relating to fixed monthly cash payments under skywest’s previously announced amended flying contracts. see the “other supplemental cash flow information” section of this release for more information. the reduction in revenue attributed to deferred revenue was partially offset by production-driven rate increases under skywest’s flying contracts in q1 2023 compared to q1 2022. operating expenses were $697 million in q1 2023, up $14 million, or 2%, from $683 million in q1 2022, driven by increases in employee compensation, including higher pilot pay scales, partially offset by decreases in other operating costs as a result of lower q1 2023 production compared to q1 2022. capital and liquidity skywest had $936 million in cash and marketable securities at march 31, 2023, compared to $1.0 billion at december 31, 2022. total debt at march 31, 2023 was $3.3 billion, down from $3.4 billion at december 31, 2022. capital expenditures during q1 2023 were $103 million, including $86 million capitalized for the 32 crj aircraft acquired under the early lease buyout and other fixed assets. status update on previously announced agreements skywest anticipates adding two e175 aircraft in q4 2023 and one e175 aircraft in 2024 under a flying contract with delta air lines. skywest also anticipates adding one e175 aircraft in 2025 under a flying contract with alaska airlines. timing of future deliveries is subject to change. by the end of 2025, skywest is scheduled to operate a total of 240 e175 aircraft. about skywest skywest, inc. is the holding company for skywest airlines and skywest leasing, an aircraft leasing company. skywest airlines has a fleet of approximately 500 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 40 million passengers in 2022. skywest will host its conference call to discuss its first quarter 2023 results today, april 27, 2023, at 2:30 p.m. mountain time. the conference call number is 1-888-330-2446 for domestic callers, and 1-240-789-2732 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://events.q4inc.com/attendee/888777210. this press release and additional information regarding skywest, including access information for the digital rebroadcast of the first quarter 2023 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 continued demand for our product, the impact of the covid-19 pandemic, economic conditions and the captain shortage on skywest’s business, financial condition and results of operations, the scheduled aircraft deliveries for skywest in upcoming periods and the related execution of skywest’s fleet transition strategy and expected timing thereof, expected production levels in future periods and associated staffing challenges, pilot attrition trends, skywest’s coordination with major airline partners to optimize the delivery of aircraft under previously announced agreements, 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, uncertainty regarding the covid-19 pandemic and other potential future outbreaks of infectious diseases or other health concerns, and the consequences of such outbreaks to 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, including captains, and related staffing challenges, 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 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 covid-19 pandemic, inflationary pressures, 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 and labor shortages; 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; uncertainty regarding ongoing hostility between russia and the ukraine and the related impacts on macroeconomic conditions and on the international operations of any of our major airline partners as a result of such conflict; 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; 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. skywest, inc. and subsidiaries condensed consolidated statements of income (loss) (dollars and shares in thousands, except per share amounts) (unaudited) three months ended march 31, 2023 2022 operating revenues: flying agreements $ 663,838 $ 708,063 lease, airport services and other 27,993 27,089 total operating revenues 691,831 735,152 operating expenses: salaries, wages and benefits 335,201 300,058 aircraft maintenance, materials and repairs 142,226 148,413 depreciation and amortization 94,149 102,745 aircraft fuel 20,964 25,090 aircraft rentals 19,528 15,996 airport-related expenses 18,295 19,205 other operating expenses 66,172 71,597 total operating expenses 696,535 683,104 operating income (loss) (4,704 ) 52,048 other income (expense): interest income 10,033 425 interest expense (33,620 ) (28,592 ) other income, net 2,174 880 total other expense, net (21,413 ) (27,287 ) income (loss) before income taxes (26,117 ) 24,761 provision (benefit) for income taxes (4,046 ) 7,027 net income (loss) $ (22,071 ) $ 17,734 basic earnings (loss) per share $ (0.45 ) $ 0.35 diluted earnings (loss) per share $ (0.45 ) $ 0.35 weighted average common shares: basic 49,391 50,480 diluted 49,391 50,708 skywest, inc. and subsidiaries summary of consolidated balance sheets (dollars in thousands) (unaudited) march 31, december 31, 2023 2022 cash and marketable securities $ 935,859 $ 1,047,215 other current assets 316,109 324,066 total current assets 1,251,968 1,371,281 property and equipment, net 5,537,527 5,524,549 deposits on aircraft 23,931 23,931 other long-term assets 420,335 494,792 total assets $ 7,233,761 $ 7,414,553 current portion, long-term debt $ 443,328 $ 438,502 other current liabilities 708,774 734,041 total current liabilities 1,152,102 1,172,543 long-term debt, net of current maturities 2,855,524 2,941,772 other long-term liabilities 994,077 952,607 stockholders' equity 2,232,058 2,347,631 total liabilities and stockholders' equity $ 7,233,761 $ 7,414,553 skywest, inc. and subsidiaries additional operational information (unaudited) skywest’s fleet in scheduled service or under contract by aircraft type: march 31, 2023 december 31, 2022 march 31, 2022 e175 aircraft 236 236 215 crj900 aircraft 36 41 44 crj700 aircraft 103 104 114 crj200 aircraft 116 136 140 total aircraft in service or under contract 491 517 513 as of march 31, 2023, skywest leased 35 crj700s and five crj900s to third parties and had three crj200s that are ready for service under skywest charter operations (these aircraft are excluded from the table above). selected operational data: for the three months ended march 31, block hours by aircraft type: 2023 2022 % change e175s 160,751 146,177 10.0 % crj900s 20,713 25,855 (19.9 ) % crj700s 52,028 67,878 (23.4 ) % crj200s 42,749 71,083 (39.9 ) % total block hours 276,241 310,993 (11.2 ) % departures 160,623 176,211 (8.8 ) % passengers carried 8,575,870 8,787,367 (2.4 ) % adjusted flight completion 99.9 % 98.9 % 1.0 pts raw flight completion 97.5 % 96.2 % 1.3 pts passenger load factor 80.2 % 77.6 % 2.6 pts average trip length 472 515 (8.3 ) % adjusted flight completion percent excludes weather cancellations. raw flight completion includes weather cancellations. supplemental cash flow information the company receives certain fixed monthly cash payments under its capacity purchase agreements (“cpas”) that are attributed to the company’s overhead costs and certain fixed monthly cash payments associated with the company’s aircraft ownership costs. fixed payments allocated to the non-lease portion are recognized as revenue on a completed block hour basis over the applicable contract term. fixed payments allocated to the lease portion are accounted for as lease revenue under the cpas and are recognized on a straight-line basis over the applicable contract term. fixed monthly cash payments received in excess of revenue recognized during the reporting period are recorded as deferred revenue and revenue recognized in excess of fixed monthly cash payments during the reporting period are recorded as unbilled revenue on the company’s consolidated balance sheet. recent amendments to certain cpas modified the fixed rate structure and resulted in higher deferred revenue amounts in 2023 compared to 2022. the following supplemental cash flow schedule summarizes the total revenue recognized in excess of (or less than) the fixed monthly cash received during the indicated reporting periods and the cumulative difference as of march 31, 2023 and 2022 (dollars in thousands, unaudited). three months ended march 31, 2023 2022 revenue recognized in excess of (less than) fixed cash payments received $ (63,195 ) $ 11,137 as of march 31, 2023 as of march 31, 2022 cumulative revenue recognized less than fixed cash payments received $ (188,008 ) $ (84,354 )
