SKYW - Earnings call transcript Q2 2018

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Operator

Good afternoon everyone and welcome to the SkyWest second quarter 2018 earnings conference call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. event recorded. today's note, also is being Please And the conference time, I to turn would like call at this over to Mr. Chief SkyWest's Simmons, Financial Rob Officer. begin. Sir, may you

Rob Simmons

Thanks call everyone on for today. us joining the

SkyWest's indicated, is operator Officer. the As Rob Simmons, Chief this Financial

Chip Airlines' the On Chief President and Chief Commercial Eric Operating Executive today Officer, Accounting Chief and Woodward, Steel, Officer Childs, Chief the Wade Mike me comments. call Officer. Officer, with Operating are Officer, asking ExpressJet would Thompson, Harbor. to Terry SkyWest start will Chief by the Chip read Vais, today over Eric to turn like I Safe I Then to Airlines' time for some

Following Chip, and Then fleet related results. I flying arrangements. financial will us the will the through Wade discuss take

sell-side Following the will Wade, we have Eric? our analysts. customary with session Q&A

Eric Woodward

Today's any current We statements results statement. regarding for to discussion and assumptions are our or reasons. estimated update events uncertainties. will a risks from vary and may that projected number to expectations forward-looking represent future of obligation vary beliefs, and materially subject and those Actual anticipated, likely no forward-looking assume contains

that I cause call to the the factors and Chip. and with in With and other may Form the of such reports filings included differences Securities Commission. Exchange our will Some turn XXXX that, are XX-K over

Chip Childs

that well afternoon quarter outlined be of as as can Thank fleet us you, release. Good in SkyWest as our execution teams. second strength strong Rob disciplined operating our and for everyone of the joining thanks performance Much today. and transition a Eric. attributed our on the of had press solid to call

of despite to and quarter. very experiencing XX.X% with be quarter our team airlines through calls, both all previous factor in the year flights and winter year well well fleet are how early controllable delivered a and both lot across ExpressJet exceptional the at ExpressJet during We quarter performed movement. reliability. busy very Airlines their with the second and operated Overall, pleased transition. SkyWest discussed planned is XXX,XXX operating during completion was summer strong SkyWest storms a have we the second we As approximately during executing late Both networks this

the work for second Our the in and quarter. thank great their are best I the them during to want professionals business

fleet short for Our risk demonstrate XXXX, including and Delta, focus strong Strategically, up into we reducing our demand to success. United XXXX setting and This with and risk. continue is and new continued progress extensions. strong ability is movement agreements our and tail long-term risk our contracts American operating for and well turn flying our both beyond. to across contract This risk, business, essential products

fleet high see XX as those product for and well. other for remains year-end. Our demand although is strong demand product ever, has the continue of aircraft delivery gone well introduction The SkyWest EXXX EXXXSC dual we seat and we as as for that and continue through our differentiator competitive taking class to of

aircraft continue flow these cash XXXX create and growth and solid expect We beyond. to will in

that entity second Additionally we getting for XXXX. a we we making to and are progress developments during at are ExpressJet, in the with the place believe profitability quarter modest finally continued

on more provide will quarter. will next seat a early next by XX minute. on information will We more in year. be that We all anticipate share ExpressJet operation specifics in total progress Wade fleet the

maintaining on we sheet strong focused our are ahead, Looking balance and liquidity.

help fleet talked our I various opportunities new and the about key believe flexibility mitigate We to earlier. risks also unlocking remains

want for us our the discussed remainder should XXXX, mitigation and to allowed transition a We strategic problematic partners. thank objectives, fleet quarter. Our Again, I and business us our on including aviation the during their transitions, of we needs sheet XXXX second operational stayed remain excellence, better and of XX,XXX The we focused Rob? excellent fleet strong our of airline multiyear well up execution professionals risk major transition busy with for evolving fleet contracts beyond. to strength. set eliminate and has our work meet as disciplined balance

Rob Simmons

$XX million less second net or income million of quarter was XXXX. from XXXX. $X.XX from revenue income This from profitable share income $XXX we up the Today, during up Revenue was QX by million per impact million new QX million from same the included million aircraft the partially quarter the XXXX, over for the offset of per of since net of $X.XX XX% EXXX $XX aircrafts removal increase period. XX unprofitable QX adding or $XX second XXXX, of QX or up XXXX. in reported $XX XX in in XXXX, Pretax of share $XX net QX of

higher fuel model. Our gallon aircraft prorate $X.XX volume second item during a million rate quarter, per in The QX from for higher and $X.XX higher per in business gallon up our reflecting both the P&L total fuel the ago, $XX than under cost XXXX. line averaged was year our

approximately subject of that model is to reminder a fuel XX% not Just risk. our

Our rate was this in compared being with year-over-year by year last the time tax XX.X% obviously at XX% law. effective difference tax driven QX to the new

tax to for be into approximately XX% our continue and year rate the year. next of the to We second expect half

Non-aircraft We XX $XX balance from in and million the model. Let up in in run of financing to cash $XX differentiation up things continue last used point the Total an in as quarter. the from quarter other couple our equity $XX QX of June $XXX slightly to in of million debt We with new me was range. important toward last per CapEx. sheet, billion, $XX SkyWest million say EXXXs. XX, our million a ended during debt new of long-term half XXXX quarter. should spending second new issued million, quarter million in $XXX capital cash $XXX $X $X.X about XXXX million acquisition of billion for planes

end and our for year approximately million these XX expected year, the term we be raise capital of in EXXXs million $XXX invest the plan own remaining planes. the $XX new With to this delivered debt by to of

million now, end payments by that of because expect two debt $XXX billion, embedded next will We quarters. we amortizing in from be XXXX, the $X.X the our approximately fully term our normal the principal in are over where debt up $XXX only million of

end airplanes, orders debt in of excess of million year. year. our be XXXX we XX toward this expect plan in airplanes where of XXXX now, year's an expect another to to the per free in end we the we additional the end would Assuming $XX in in down million equity up no reinvest are by and for continue that half second with pay cash flow peak at XXXX, including XXXX from of cash of debt the will to $XXX We

year. During still QX, remaining under by have authorization $XXX million utilize this million in our we and repurchase $XX did not repurchase it. any authorized Board program expect fully incremental last program our under stock to We three-year

of on movements announced second transitions Wade? is second fleet share We now a the the agreements perspective movements from extensions very half be newly color be today inked we the give half. half and fleet earlier and through in some fleet the will the of of the half in XXXX to the would per first because that as you all you execute share expect $X.XX the Wade and of the similar take in to extensions second new busy expected per contracts earnings and earnings today. second reported The we we half to year.

Wade Steel

first these I Rob. fleet give you discuss related the our implementation update agreements and Thank of an and to will then flying changes.

delivery Airlines, under aircraft CRJXXXs and During of with with The with a Airlines' previously SkyWest same period. operated be will Bombardier by scheduled These we to Delta expire XXXX new CRJXXXs these Delta SkyWest nine-year flying Airlines under XXXX. by be flying Bombardier will contract. the contract will replace aircraft half reached CRJXXXs SkyWest anticipates during under of a XX from agreement an quarter, agreement second taking XX Delta the to the XX operate time acquired announced through

under We our with also six our EXXXs EXXXSCs We by year-end. during of a fleet. are of further expected last American at XX the Delta EXXXSC within CRJXXXs took aircraft to the aircraft total during the a developed the existing arrival sourced four-year These agreement contract year new We XX XX anticipate a under be with our securing the of agreement months to under additional Delta quarter. XX of during for delivery from place partnership quarter contract.

in by agreed extend previously extended to quarter first United service operated in agreement into three scheduled June all CRJXXXs The secured and Airlines XX additional expiration the XX existing XXXX. agreement aircraft were new an for was during We aircraft years. well. for and These mid-XXXX during scheduled are XXXX an and XXXX. a SkyWest placed with aircraft for as We second this by early agreement service

to operating The within for XXXX. are aircraft September with expected of As XX ExpressJet three-year XX we be agreements. United from to of this all are expirations and be fleet through a for service between other extension, early These to XXXX placed our agreed long-term dual-class CRJXXXs a to are aircraft used CRJXXXs into result under expected partners. contract our for United. contract United sourced operate with existing Separately,

for in We changes, expect of EXXXs contract long-term our which that three EXXXs by quarter. EXXXs anticipate during XX agreements. additional all United With will operating Alaska taking during and we will additional have transition movement noise Under fourth by flying third we under partnership, the the third anticipate quarters. and under efficiencies contract four after enjoy We some quarter, do Alaska. received the with early exclusively XXXX fleet these ExpressJet

with well to changes. as First, in United operating result associated maintenance aircraft, cost crew the transitioning and XX CRJXXXs changes some delivery operation location as will ExpressJet incremental bridging

We aircraft the accommodate contract, delivery XX to change. American aircraft downtime CRJXXXs transition also as to anticipate primarily the some we

connection returned the wind the completing owned and by owned service of Additionally have the three removal Delta. the Delta end dual-class CRJXXXs ExpressJet XX CRJXXXs down to from CRJXXXs agreement flying, year. of ExpressJet's our part Delta of been Delta as all aircraft, We including to anticipate

of short-term, expect the we aircraft retain majority the under expense. flying transition our agreements For American these some various with to

leasing these XX remaining, various not these or selling aircraft tail their XX American including American The with utilizing aircraft Separately, own majority since flown expect will are XX CRJXXXs little However, for contract six aircraft from or very third we contract. risk. CRJXXXs the we extended by Delta that of aircraft parties the with no with ExpressJet early These options we include that parts. aircraft, these leased from the evaluating debt are for transitioned selling, original be and to beyond short-term XXXX.

the We lessors to return XXXX. aircraft expect to by these early

discussed, As model. and our is of risk have and Rob Chip the reduce to our overall part broader strategy movement improve fleet our

us leave second these all half well fleet transitions of a net have movement more going busy operation, half and XXXX to I us impact agreements for and overall early of of are the XXXX the continue tail in beyond. the fleet reduce be to positions and outlined, risk with second As with year. The in smaller, ExpressJet efficient we and XXXX

Rob Simmons

the Operator, we Q&A. Okay. ready for are

Operator

Instructions]. [Operator

Deutsche today Please first Michael Our go Bank. comes question ahead Linenberg with from your from question.

Michael Linenberg

I owned by The are here. out everybody. XX Delta? are those a to Delta going and they are of are Delta, Hi just that SkyWest back couple coming have they Are CRJXXXs airplanes? airplanes questions that so

Wade Steel

This is Michael. Wade. Hi

Michael Linenberg

Wade. Hi

Wade Steel

Hi.

are CRJXXXs those that or are SkyWest those transitioning contract. American aircraft owned all SkyWest controlled XX SkyWest at So flying the to majority the for and Delta,

Michael Linenberg

I see.

coming So it's majority to are that. the

sounds achieve it's but I to touch negatives, Okay. the similar look positives lot My way there's is net right, we that said, earnings because of of half impact takes second half at what there you of the an anticipate P&L right? when you on perspective And right it to the The to XXXX. puts the and to second to and in should just from back Presumably negatives. of cost, about the said were than say the net second a half what question is year. first more Rob the what for like it? able year is transition for go Is

Rob Simmons

other the going That's fleet But also movements take to about. expense were And some that by of right, XX some talking Wade there is of to was related be to we the delivery year. Michael. of these transition expecting end more EXXXs

the year net, a the second half. of net the like expect look half lot would first we So to

Michael Linenberg

believe will replaced still a and number part sense you be coming as that are American sounds you airplanes flies, the just ExpressJet said that guess type And you give like also What's the tail Just Are for are date? Okay. aircraft in liable and then for placed be American. for would It machinations? just last Delta airplanes and and to the were the some I just number So these lastly, of of that that to or were feel you that aircraft you I there some somewhere? that we of of And believe, that on airplanes what indicated the us risk, you Can airplanes were call. These trying out is potentially quarter of there no to them. out, March sell? gone either out what's of left What's airplanes were be there coming left? out you example, What's are sense these lease get were up have so coming or return out sold? XXXX? of through I what to the that placed coming the ultimately terminations, that there that they had all to a get for? what? has

Wade Steel

Delta Like go lot side, there risk. attractively about. that the ExpressJet is there and I the is go there again. this very very one, debt are no is there your tail planes to I back that you those financed. bit. XX would is Of we talking fleet Michael, that about, American Wade that that of debt aircraft, said, what we and movement on little were over ones talked just a the a was The is little lessors remaining say will number

the us So half do whether lot with your get great those really exposure that to to those. aircraft, lease, give have or a we sell it's To the question, something going we opportunities answer with of about airplanes. of

it's middle the XXXX and of XX to become out start somewhere available in XX that of exposure. we where in range the So

Michael Linenberg

Okay.

been some So XX point, to XX up this to at are has that's because announced looking really or we in actually like that for homes were helpful on up point airplanes based time. what

And a it home a airplanes. like so lot now of sounds you those for found

new the CRJXXXs You the cabin, in et with atmosphere opportunities with have got new cetera. coming

very helpful. actually that's So

from My slightly are the who you CRJXXXs should dealing with the burden to about So ownership or not airplanes? how they because be the day, end since we margin think the in a last airplanes dozen the of is Delta Delta those a one So at than taking mid-XXXX. it's bears will cost. you going coming more that of profitability on that own be question,

are am half overall a margin that? I to airplanes that wholly-owned that but on guess they or figure to behalf of As or United? we will leasing profitable and to less as profitable, trying going or be I bringing Delta accretive out, operating How be, less they should than about EXXXSC think

Wade Steel

Wade this is again. Michael, Yes.

So all coming with there all capital is providing the those that are that, be all Delta point, XX down of And in. of the Delta the those. will of your payment, is debt. CRJXXXs owning associated to

capital. be So no there will

XXX. return our won't is about than wholly-owned be we the into get So would it less much on specifics what -- how a But

Michael Linenberg

enough. Fair right. All Okay.

That Okay. helped Thanks.. me out.

Wade Steel

Thanks Mike.

Operator

Cowen Our next ahead Becker and comes go from Company. question. your Helane with from question Please

Helane Becker

the question Thanks the I taking for you or guys. Thank questions. appreciate Hi operator. time.

Okay.

One, So there to from aircraft? your the of that those lease opportunities aircraft in I Bombardier, just terms some on on are had are a leased improve couple.

Wade Steel

we are So older our pockets at that. do quarter of to are I expensive and an And had one news. leased last would we continue have chunk say, some for new a of of looking today, I look of we airplanes. Helane, opportunities any our to of in like opportunity accretive But successfully fleet way, announced refinanced we have on going to couple that don't where in it we as more

are interested deployment that one potential is capital of in that So area we pursuing.

Helane Becker

my loss. $X.XXX other What's that? other is underneath line this question with then And million Okay. income to respect item

Rob Simmons

Yes.

the capital the fully equity gain things this the is negative realized. has quarter, the drive which around had It which of help quarter lower. mark-to-market. last we for we was investment monetized that us, time our gain But But remember first been nice, of that an and time. equity we positive tax a and another one rate that this now investment is fully was you mark-to-market, had If that net

there noise more related forward. that So going be any to shouldn't

Helane Becker

for Okay. my clearing EXXXs question they the have that Well, And to thank you taking? about United remember talked at So that new maybe up obviously, last I that all me. for you didn't is, are

Chip Childs

is this Helane, Chip. Yes.

Helane Becker

Hi Chip.

Chip Childs

we about clearly have really anything we EXXX. to don't about I discuss what yes. have to say, We those relative to would talked them it, know

United about we with carriers a Delta, As all has know in decided operator. that it. major bit own the don't talked And very I is the of interested the way. there aircraft I that certainly know a trend us are for of to this necessarily

and them with there may we as very approach working we and if for know, are disciplined can very is in to that We you those. see them something potentially in everything. on But are ways we it interested not on win our provide

don't And everything. sometimes win want we to

approach going as are of we things something call, we we our tell on with But we that about to come you and have if can with strategic we So the of that not, the have it got same parts pursue mind talked those. what a from in going still, the still. may hope we on business lot that have other

So we you as anything. informed know will we keep

Helane Becker

map obviously And I That's talked one you. great. have about part factor, schedule I moving this, all Wade on because you the weather you so you location and all you ago these don't or fell, other about crews this said were, know, on something, places you aircraft years don't arbitrarily. tucked a and the completion in have United your guys moving like remember they go issues Do different know United you you said operating worry but Thank about, bunch Delta. from question kept reliability because all when these just you of different different I had just Americans over or changing and this last if have metrics, parts, around, to then a now, got like in with

a without know and long-winded there your work that here, they yourselves? you So but to been equipment have able are everywhere just question, I with move them for it's reliability not going some out to

Chip Childs

don't own excellent an airports the point single every map, because set and fly airports very and of at challenges. go operational in several cities fly we that's tremendous unique the to city have destinations Helane, our that you are there of you we we of a to smaller Yes. look same. amount to consolidated the we that fleet few are no And if and have their two website fly major to

can we contemplate that we we the we be of say mean, but risk of and that discussed managing So dynamic contracts making all it's ability our partners, agility, the make this for have meeting our that contracts part over have world time respond about what sure all agile. think I to of cost. has additional developed SkyWest to been transparency transition any various in to our I within sure being partners, about needs within to contracts able with that contemplate the also and

in Sometimes there savings things. is cost these

so, last the over decade contemplate to plus items unique ATC, local contracts started has the airport of challenges. And our evolution operations, weather, of

our we this is risk, reducing so have talk what through to element we big of And partners. what done about as a

there making Are what sure to priority is would So about fly? of we are where question. our it. we we having partners need. deliver like number been But one our that said, No comfortable preferences

Helane Becker

very much you Thank it. appreciate those answers. really for Great. I

Chip Childs

Thank you.

Operator

from James. Raymond Syth Please ahead your with comes question go from Savi Our next question.

Savi Syth

everyone. afternoon Good Hi.

Just here. a couple questions of

does that should abate could to I parts and it talk really of the announcements the understanding like a we as when off? about start here, today, going peak you becomes some start intensive forward when that change when and costs, that might new taper does know or you the see is when of transition, lot stands picture? does transition moving But that have kind and when On that there might that and like to

Wade Steel

Wade. Yes. Savi, is this

the taper it really off kick it the December timeframe to November, starts year. first will far the off in peak of part October, starting then and really costs, as as transition to starts in it September for So and in real

Savi Syth

Okay. And you for That's Wade, again this is, then helpful. maybe too.

with the even CRJ On Or is is extended that economics any placed that current they the how as or then rates you about improvement that are the CRJXXXs similar those with or talked at being like extensions ExpressJet another EXXXs? that? have at And think there get that about, maybe that one, should even we extended? gotten do as replace

Wade Steel

about bit the Well, Savi, just little again. are talk the CRJXXXs. XXXs. is bit this The XXXs model I will Wade than a different a little

We will own aircraft. the

we with of work little get year. So rate And the bit new on going such the then the deal similar our with anticipated different. cost economics forward it's and we anticipated to are The far cost to will XXXs of what partners all next anticipate a our extensions, as forward. and going our

Savi Syth

it. Got

Wade Steel

I both think agreed other to we extension, words, since think parties. for it's the I in good

from I perspective, we our think try the to cost. predict

for everyone the a difficult that as us good obviously think understanding United of get of well I not those. other part as was our we a as has conversation. and partners well. when That's good extensions And

Savi Syth

sense. makes That And one the cash question last side. on just Thanks.

XXXX So dry Or no mostly cash just changes, purchase, XXXX? use is any that since flow of with real these going around cash of shareholders? return still to to powder be is for just change there and this moving the does or

Rob Simmons

Savi, this Rob. is Yes.

made in of comments year. cash think So flow I these think cash won't this we the I EXXXs are be that acquisition XX repeated definitely XXXX hold that that to next for the we through year obviously new continue about deploying

cash incremental next year. that's So have we that potentially

So cash the overall think remains flow strong. story that very

Savi Syth

Thanks everyone. Very right. All helpful.

Rob Simmons

you. Thank

Operator

O'Hara Your from comes ahead Steve next Sidoti. question. from Please with question go your

Steve O'Hara

Good Hi. afternoon.

Rob Simmons

Hi Steve.

Steve O'Hara

the quickly pilot Just on front.

of in there cetera? if source as to your wondering key terms still et was Just pilots, ability everything's it

Chip Childs

it's Chip. Steve, Yes.

have is airlines that as our of of and know these say, we in refer some extremely I ability of our I both what of we transitions are every kind I execute comfortable so today, but this quarter, the to with transition. are well we at staffed, situation. generates adequately to which think pilot have can some we very

and to So we are today, staffed well of optimistic. as be continue

Steve O'Hara

about of that are I things done? dropped hoping Okay. could that that came it now Or you And on the few I wondering, and think like And it little more to did came that to $X.XX out it you it you looks together, talking and the quarter at talked if things to year come to close the seems think I sub a then and just everything there per are were still get there was relative quarter that, is together initially just looks everything then of like last be just $X. bogeys a about incremental? we together, you noise maybe, transition was about? am talk guidance I down know a that are block bit. cost some And then that would like kind just hour

Rob Simmons

Let about me the little a bit talk quarter.

during the about the we second as really But vis-à-vis movement were the is right of I that the all with areas. was we production are think hours Wade quarter. production in Obviously, you a block the pleased you strong know lot talked obviously half, our quarter not operating as and this Since second we made half and talked strong created it know, the about comments in we of our that transition this very had equal. year. about, performance

was. Thus friction that guidance of in will way second be full-year, operating in most half the So of when you it of the that expense of terms that year. some our think the of it from incremental

Steve O'Hara

can time just more those do feel you. done aircraft And for so Okay. the are you other Thank that up obviously partners what with last that, and my you based And that? you things like How aircraft question. and that's work that over on confident demand on today have you there's far? come then your

Chip Childs

continue next years. view the year, going or a very, just next three demands be that couple the want come factors. to Thanks, you And can have opportunities, the far do as of safe strategy is we do same two of the Steve. results work lot things us and demand partners' it This we we and together can comment of and new they our the care is we like referring operator, in to view several we a overall there don't I stay yielded Chip. of if discipline, of with think that is years are our continues that has economy. to our it's up to eager our the we what go a back so with about I demand doubt do. traveling and top over for reflective have. I continue seems I some transition public I people, every are they opportunities. a to and existing do when lot are would the stay got, what solid. to don't very I of flying demands meet as some that a sometimes will our strategy, we reiterate in give be think It's things is great It's that we long of the manner and to engage of take travel needs. say that disciplined it And there when on our quarter

entire XX,XXX we see very can ago, we But years about. I things are formula the about perspective, know from don't got be have So that our good we same two be think we saying talking that I a that here these that would reflective and we the exact best the would going doing in very professionals we able what have to of are can't we for been a clearly, us. have it's things without do execute. we And country aviation disciplined strategy talking

there can answer about to same long a the what that optimistic have. execute that perspective as we we your to short very ways we continue think for And so question we long disciplined and a I what's strategic are from are demand is as do, out

Steve O'Hara

very much. Thank Okay. you

Operator

question-and-answer ladies And I will Chip remarks. and call session. closing conclude that would the turn today's conference like to to any gentlemen, for over Childs

Chip Childs

Thanks for your SkyWest. interest in everyone Jamie. Thanks

quarter. we results the are are very happy with We this very,

throughout professionals with companies to outstanding We look quarter. our are next you. the we associated be you grateful Thank forward humbled updating such to and aviation great partners, further and

Operator

conference that Ladies attending. today's for We does and thank call. gentlemen, you conclude

You may now disconnect your lines.

SkyWest (SKYW) 26 Jul 182018 Q2 Earnings call transcript