SKYW - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the SkyWest, Inc.

Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Rob Simmons, Chief Financial Officer. ahead. go Please

Robert Simmons

joining for the today. call Thanks, us everyone, on

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

On the Commercial over the Chief to the Executive comments. Woodward, call safe President some Accounting to start Officer; Childs, with Chief I Eric Wade Chip me today today harbor, by for Steel, to I'd then time Chief Officer. Officer; asking Eric are and like Chip read and turn will

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

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

Eric Woodward

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

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

Russell Childs

Good everyone, Thank and Eric. today. joining the afternoon, you, for and thank us Rob on you call

second first XXXX we transition efficient footprint. half to a to as a fleet quarter move initiatives monetize with of our forward to a more contributed continue and as The airline strong single

together employees customers. nearly a Day. our work efforts our while to thank weather hubs, in want severe Our for second several XX,XXX and for a quarter for great Day our to the product results employees their reflect adjusted the completion key strong And I Memorial through June schedule we solid our deliver fly to Labor quarter. from of XX.XX% affected delivered

contract year, multiyear putting and initiatives CRJXXXs an leasing also Today, to more XX We on few planes. with XX agreement to engines details announced our XXXX. of we the new American Delta starting we along American these to earlier into late on in business, another are beginning with another announced for some including Supporting X signed XX currently contract wins a this service aircraft in with give XXXX. expect in extension a have contract developing executing them lease will minutes. start Wade

with product. that in deals, years our possible recently, without ability and gain. limitations while set market for These unlock to with consistently existing efficient share would this and progress deliver have up None we other us a our scope ability made future to reliable along growth making opportunities also growth of partners' illustrate our be product

working X,XXX X our remain a carrier. job. delivering simple the of onboard departures. to better something together continue distinct we and do service a more Our partners than different any and and responsive is to daily agile needs not -- important ensure SkyWest that's product our seamless Providing on people and customers' people than And our quality focus for other

to value scope. intend leveraging optimize our the assets position in continue to We operational our of the within market the

With convert opportunities, and and our are This hiring feel team position XX% is market our and quality area able has into We needs. our from than last meaningfully in of levels. to is be more recruiting is XX% reduced which internally XX% risk above up year. strong been past to pilot developed than year's X we is opportunity respond another to pilot to over still the highly running be product a from More current also to pipeline, fortunate coming strong and ago. hiring continues our strong partners' years quickly availability desirable culture,

our great our a aviation long-term overall generation. success. will on cash work enterprise remain of The focused professionals for fleet their sustainable flow during the help that with for opportunities quarter. January We to position second closing latest combined thank again Rob? of us drive and team us and earnings very want of excellent I the these ExpressJet balance reduces healthy sale, growth risk announcements,

Robert Simmons

we of per net income pretax in of QX Today, of compared reported share million $XXX up per quarter million XXXX XXXX $XX XX% of second income quarter $X.XX share for or $XX the to second $XX $X.XX of XXXX. is QX for XXXX. the million Pretax income million from or in

shares is Our down of diluted count QX of share XX.X from million X.X year. last million

effective was under XX%. a tax QX little rate in Our

the We continue to be tax second half our XXXX. for to approximately of expect rate XX%

early a We million, last the me $XXX up of quarter in June million things as being XX. of quarter. included in about of say million Air XXXs $XXX acquisition EXXXs; including $XX Primary our the X $XX million uses balance from debt $XXX placed with in and the paydown million at the lease couple of Canada. for cash CapEx, on Let ended cash share for of new sheet repurchases; quarter

$XX X quarter the finance will the new for effect that a million Debt contract. adding down from to ended last billion, new Delta the debt at of slightly quarter, fly we for in including announced under $X.X previously EXXXs

a capital for expenditures. turn to Let's minute

few QX for $XXX of to half fleet. a over spent QX $XXX expect is was of and engines. $XXX invested in million CapEx billion XXXX, CapEx we million, $XXX used CapEx $X.X expect for last XXXX, aircraft handful and heavily CRJXXXs, driven million the primarily In number. for math EXXXs. million on was and In second in spend XXXX, approximately half. CapEx, first would the little a the that rotables we years, million toward only In of $XXX to the spare CapEx growth we new the here we recall, have you XX by in As deploy for acquisition our

by the come $X to to debt end XXXX, will continue down that under of billion. expect levels We

our that our all fleet largely in that with of of coterminous bulk debt. the reminder and financing billion the contracts $X.X a XXX is under financing Just debt debt flying EXXXs are of related is aircraft, our

term new of financings debt in the year debt to amortization to million continue aircraft repayment of pursuant through mortgage-style delever any We new orders, if new each $XXX embedded expect via before this for to in future to million any. $XXX principal

us will and respond allow opportunities. maintain market maintain incremental to We the of delever generation cash quickly any to that sheet liquidity, to expect couple strong agility the balance years strong over our next

During the repurchased This $XX and remain We stock to dividends capital Board in our million QX, approved via returning authorization repurchases. shareholders under in program combination this us $XXX million a February. under program. $XXX by leaves we share in of remaining million committed to

first quarter's per double-digit gone. growth share the XXXX's feel off earnings of good the year of changed. $X.XX has full how We And low expectation XXXX of about year half has last for not

growth announced to QX representing to seasonal incremental would XXXX the the pretty expect earlier normal today falloff elements, opportunities we and seasonality usual the With look similar QX. with fleet in QX,

the continue confidence shareholder to to future make value. to create visibility gives investments cash disciplined Our us to flow

As with be organic we to could a or future This if investment flying, continue when growth and in include demonstrate flying ready liquid sheet. balance capital come, we opportunities and leasing. new strong will opportunities deployment prorate contract

In course, addition via returning share we also look growth organic will dividends. at to continue capital repurchase of opportunities, to and to shareholders

As cash earnings a balance between Chip healthy striving we mentioned, to flow. growth and drive are

initiatives. you give Wade? movements fleet on will Wade and other some announcements, opportunities commercial and now today's contract details

Wade Steel

as quarter occurred Thank during second you, that additional agreements our implementation Rob. the fleet I'll review of then opportunities. updates discuss and as the latest these and well changes

from to brings a fleet CRJXXXs with this working we're is making new CRJXXXs our to Chip pleased them today, long-term fund Along XX to announce announced with agreement with total their additional last XXXX. we long-term XX fleet mentioned, this CRJXXXs in party to extension agreements expected we X third help we'll American Airlines. to This with quarter, a meet -- American. with of of XX As with long-term and happy growth. the We're and acquiring X the CRJXXXs service We're the addition CRJXXXs the we're American, launch with needs. under anticipate continue progress the

we aircraft during year. X by total to new summarize to EXXXs which X bring quarter for will the XXXX, more fleet the new end To during our second we're scheduled XXX Delta, received next EXXX of delivery of stream, and our take delivery

second CRJXXXs during received We also quarter. X the

are take expect and We remaining delivery XXXX. CRJXXX Delta. during to during and by These QX owned of the CRJXXXs one X financed

our continue shift me we leasing opportunity. to where business, leverage gears to Let

from first operation. delivered with XX of XX we our The party. announced the the remaining anticipate are we will aircraft ExpressJet majority a through under middle year. These CRJXXX aircraft be the agreement domestic a under aircraft CRJXXXs agreement, aircraft delivered of will previous and the our previously from sourced be third quarter, This lease next these of XX-year

SkyWest during CRJXXXs We have the X-year aircraft Separately, a lease second our Air of third ExpressJet quarter. leased X under We the first by with also delivered delivering during XXXX. Canada XX X to remaining agreement. return under will lease anticipate of CRJXXXs quarter the the

the majority of payments end the expect the aircraft. we the We majority lease operate of through of However, year. the that anticipate on to receive SkyWest aircraft will these

Finally, into This XX during engines QX, to under already lease with engines X-year an in we also agreement XX Delta. to term. with entered to is the Delta CFXX-X anticipated an CFXX-X addition lease

We begin XX year expect the deliveries late mid-XXXX. next to the on engines through

remainder we're for leveraging continue platform position anticipate over As discussed, profitable and will execution minimize our of enhance our the We we ongoing I've the and well several to XXXX built these and we've unique of model ensure past beyond. to to utilize years to agreements -- for help fleet positioned the opportunities, risk. flexible

Russell Childs

for ready now. Q&A we're Okay. Operator,

Operator

Instructions]. [Operator

comes The first Deutsche Linenberg from Michael question Bank. of

Matthew Fallon

Fallon actually on Matt for Mike. It's

or it, years, opportunity incremental earnings So contracts the when business going you forward, extension? outside most or look what X to X grow is at the compelling of call

Robert Simmons

sort Well, one sort driver Matt, scope into our I of our would would of be I put work categories. creatively growth to ability within limitations existing partners. Rob it X of would here. say number

over outlined, category, us as leasing operational And our we the opportunities, second Wade to opportunity would footprint sort that be the time ability within a third have would market be of make wins. category, then within broad assets The gain lease. to ongoing for share opportunities,

next those the expect couple think to think us broad of I X all of against over I areas. you execute years, can

Matthew Fallon

inflection I like at the is As real flow company feel a point a here. quick follow-up, cash

could your use sheet you rank just market deleveraging, responding any returning of on so priorities to to terms cash opportunities? And balance in and of shareholders cash,

Robert Simmons

-- shareholders. and sheet opportunities. for strong think I'm there remain want us we exactly. whatever next initiatives to be to for of laid But Sure, be I we can able market is to balance able to sheet just We're thing right of take to continuing returning capital that think to out But prepared clearly the future. nimble want prepared there be we've liquid committed a Matt. if investment and those time the advantage we balance a is have and help that our to to delevering overall, No, do to in be a number cycle I'm rank including out, not prepare there, out with sure prepared I over them

Operator

Syth The comes Raymond next from of question Savi James.

Savanthi Syth

news of maybe to that down just of and I talk they're CRJ wanted ask, footprint of about the sounds program. Can the kind aircraft have your then future aircraft program, the the now? of CRJ buying implications the production right the kind you shutting in and for kind you about like buying it Mitsubishi

Russell Childs

their Chip. recently. number closing with a model Yes. Look, down. Thanks. a this to is that I existing be and and think will fleet. Savi, we within existing But Bombardier, new here of It's development that strong question develop it Mitsubishi line important we're the certainly, as about know, embrace have the our that we program. business it's aircraft disappointed I great to that able that production opportunity excited Yes, relative believe we're think you

into is to fleet look Mitsubishi develop have within very also for new to their us, that just parameters something existing invest, they've that with that's finding this perspective, their expectation work can is forward got from to fleet working think that and what firm us. do. And to our ability they with think well. they provide part and ways I some But we the enhance we what new a have important our I aircraft that And that forward they'll going this the as

door good to ability different for do we think had I the to things do that some the potentially haven't this past. us opens very So in a that

Savanthi Syth

you on Do the for any cost CRJs maybe already? see of or implications values maybe EXXX in-house kind values, book the sort of carrying

Russell Childs

fortunate we with think the feel commitments comfortable going very I the manufacturers market's those future. we We're existing in position probably in elements the our direction. with that that go have that for upcoming to with

concerns primary our of one not that's So this time. at

Savanthi Syth

Got address then, maybe as being second And the Chip, the Advisory you, question Committee to it. Congrats I nominated next too. Chair. can on

where more of important anything airline kind kind kind Just these the and industry curious regional of if why are important. specific of there's to initiatives that's next-gen

Russell Childs

some things the SkyWest, in we're There's outstanding a I it's foremost, I when that sort department flight first of thank got very think I've technology. and tell involved to it got an Yes. that mean outstanding relative an company appointment. of a And you humbling for lot many way, quite By embraced you. this We've been capabilities. I to operations embraced that We've with a very IT technology. time. maintenance and comes We've evolutionary department. can

that as look think existing aircraft we an fleet lot things We're probably new technology. be the aircraft to within happy we they addressing use an with we're get I new there's we're have to with but there's I the fleet think come perspective, investment an we some needs that outstanding from off the getting, help to to production where as lines, that that of need a national be. things have Certainly, industry that's a system to of including lot aircraft the aviation taking. that of ones can need

one So obviously for number the thing us equipage. is

hard And at. regional industry think we so dynamic good, take strong, the look within it's have that thing I to a a

And there's the that seen I involved good think There's of ADS-B it. and some to stories SkyWest. effort to and be involved look there's how regional more some we've lot a need lead I'm is the programs. excited things ROI of efficient. And that's we And is with to that produced particularly relative forward success professionals that committee. extremely I more on think lot helping safe tremendous the at to a side. do, that And in the of that we

Operator

comes question next The of from Duane Evercore. Pfennigwerth

Duane Pfennigwerth

XXXX the commentary off XXX of with respect XXXX today Just your into trend this for to your about that CapEx, you what's level view outlined?

Robert Simmons

It's here. Rob

EBITDA a to would expect likely orders to that terms where orders in we any CapEx it's some that time, what there of depend there, new rise, creating be future same XXXX again, so want cash future new would At again, environment forward. on absent obviously, for we out fall. the new orders will that strong obviously, flow hope it's the a holds going would So we going because But are in prepared coming.

Duane Pfennigwerth

But for about was or maybe did around than much with And can used lack just this that a then carriers this explain cancel you with see bad with there's function was weather, mainline the demand help translate anymore? MAX cancels of on you quarter, It high if to. uplift short-term availability. it of different cancellation Maybe comment more why SkyWest of number just due you doesn't to rates something it a structurally can mainline increased about this Or your quarter to some quarter? more contracts?

Robert Simmons

had we that the But allowed in there economics. weather Look, the have had we of are to few that been But bad fortunately, changes offset quarter, the of weather was a rough any -- Gross that affected June. way terms opportunistic clearly, I over our other contractually us completion That years cancels by -- handled. helps. and that last during think the that weather, of not effects. was affects offsets again,

Duane Pfennigwerth

ad you're short-term think any as relates availability? demand you of or it Do to lack MAX seeing hoc

Robert Simmons

I mean the does. no we us. a to it is a footprint the answer fly very effect simple hasn't big because And than been different MAX

Operator

of next Becker Cowen. comes Helane The question from

Helane Becker

And missed I guidance you appointment. Chip, XXXX, did actually Savi's my with had respect or I was, to I'll on then your and update to it? congratulations add the you, question didn't

Robert Simmons

Helane? you XXXX... did XXXX, Oh, say,

Helane Becker

I you'll think so. 'XX, never I but said thought know. don't I

Robert Simmons

No.

per double-digit share has what XXXX, quarter $X.XX. XXXX to of changed. growth from said outlook of our still XXXX the respect in basically, was with earnings off expecting we not Now We're last

So unchanged. that remains

Helane Becker

in on their seeing Okay. -- some are hear like, I ask are was on MAX applying who flying to people of the Are pilots. this. made interested to long, because comments to let fly how happy you? to then for -- And the think you airlines seeing you -- right issue, keeping now overstaffed me are, the you respect hours just With

Russell Childs

Honestly, Helane, not. we are

the we and hours. through getting pilots are existing up into the on our of to their XX% also also with all today anything we're issue. of We're we're getting that issue the today not without I have at pilots nothing with which the -- actually MAX translates the X,XXX of within the pipeline from made or model, schools. think pilots. getting much coming pretty But developed the They're our comment within least changed has MAX getting been relative side majority other the

Operator

The of next question Joseph comes DeNardi Stifel. from

Joseph DeNardi

about value just organically. offering talked talk about you grow airlines? the kind Rob, you Can take -- talk that to and can you you share some you're gives to What opportunities about proposition that of it's kind so can years. of are there whether take some or spread out kind bigger next you evenly confidence of over share? just do then the to if opportunities And couple of

Russell Childs

addressed know Joe, you Chip. a I'm at this -- going I'm if take you is crack will. going I this, to and to to this Rob.

a our there's has of think of in the that true, with we last confidence it's over gained things of couple us a couple and think years I things. couple hope partners,

tell have First to proven a professional resources, and don't these that in the for." that, major And have long do. on and to that capital fly we're and what a a partners our And to where that's and times perspective, we're at a in of over something we be lot goes foremost, We over past deliver going we've a, pride we way have "We to to love to years, carriers. a the be gained that trust the resources. position we you with our in do what we perspective that say, can't we carrier and both onset. relationships in being We a to don't go we aviation difficult committed from position a say what going human that ourselves has some

Second that's things. should be have several willing us it and term of that had sense moved extraordinarily want that." backed work all but didn't to things One partners take our and we creative. see to with long of that flying have the off the thing strategize just and partners to conversations even with last the years is they the may our them, with all, resources they of said, design to we're us dial them different not "You make for ability over them with with some help strategic We've we and take do some where needs

So to that look, to think tell by conversations partners, foremost, mean and that. how And we're strong then in with today's have through to and say, continue is always I fleet our relationship we we management off, that fluid other that relative I and does things given partners. the our I to besides think our first you X and want, strategic what at far, connection they schedule. that deliver with as focus #X is thing translate? Once that certainly our you how resources. I have there's capitalize performance SkyWest this backs summer happen dynamic then all

that absolute unique. us that, and visibility be and we But heard in that get we provider history XX-year opinion, of it think some seen is what our And from I've we it are our and to #X say some helps creativity we my things in choice. that know their internally mean because They goal, that have come that we we this our them, is believe with partners have.

that to made. those So Rob we comments being make able that's some of statements and get our where

Operator

& The from of Steve next O'Hara Sidoti question comes Company.

Stephen O'Hara

of next of beyond planned? And your the based year if what's that kind you're of is on tell already I And expected what fleet know CapEx terms minimum based books, next have in the on it's you in the CapEx already if moves what's year that's that what's maybe block of could maybe now just the the and hour don't level kind baked maintenance in? the the kind taking growth CapEx? right of the fleet I then Yes. you mean me --

Robert Simmons

here. Rob

$XX XXXX. I we said levels 'XX over going based CapEx So because earlier, have did Baseline buying new a running than else would to I I But million of likely things largely all the a just stand year topic depend again, 'XX engine hotter ago say vis-à-vis in it quarter, ex we'll on. tuned would would that a on CapEx think again, stay airplanes, expect where little the equal, market. today, again, we CapEx of on like are right opportunities CapEx fall now, within is about to

right more about engines market there where the And find we out opportunities. a now buying so little we're aggressive in

is top CapEx baseline and $XX would a of running if any, So roughly on be quarter, million aircraft, that. then

Stephen O'Hara

I a next of Okay. maybe year? mean like hour to that growth, block And way then for is there bracket kind

Robert Simmons

Yes.

think we think I end do we'll the year a this we'll we'll going year And again do what typically, likely of year. forecast full forward. publish the it's is usually at I -- that

some You'll press sort the give quarter more we'll it of updated on XXXX. we've next the release notice end likely of in color -- for XXXX. the through And that

Operator

question-and-answer I conference Childs back like This concludes closing to session. over any turn Chip remarks. for the to our would

Russell Childs

for sure call to for well think strategy quarter. Thank of that care best to continue as Thank our the availability you talk making we'll invest us a your continued and strong take in We're we we've is as to SkyWest to our of and aviation interest results shareholders. the on you working in the that provide business our and industry the our professionals next good team business partners model got model, continue today. will in this And as with us we you. happy for joining in one

Operator

has now today's Thank for The you attending presentation. conference concluded.

now may You disconnect.

SkyWest (SKYW) 1 Aug 192019 Q2 Earnings call transcript