SkyWest to lose 157 CR2s by December 2015; Adding 32 E175s

[JustinS]

Saw this news to be very interesting. I figured I'd share over here for discussion.

http://inc.skywest.com/invest/releases.php

Michael Kraupp - Vice President - Treasurer

Ph. 435.634.3203

SKYWEST, INC. ANNOUNCES SECOND QUARTER 2014 RESULTS
08/06/2014
SkyWest, Inc. today reported financial and operating results for the second quarter ended June 30, 2014. Highlights are as follows:

• SkyWest’s net loss was $(14.7) million, or $(0.29) per diluted share, for the quarter ended June 30, 2014. This compares to net income of $20.7 million, or $0.39 per diluted share, for the same period last year.

• The significant items that impacted the financial results for the quarter ended June 30, 2014 included the following:
o We achieved lower than anticipated performance incentive bonuses under our flying contracts and had unfavorable flying contract settlements that negatively impacted revenue.
o We experienced a significant amount of pilot training and related costs associated with compliance with FAR117 flight and duty rules, pilot attrition and introduction of the new E175 aircraft.
o We wrote-off certain asset values acquired through the ExpressJet acerquisition, wrote-down the carrying value of the Saltillo paint facility and recorded a loss on the disposition of ground handling fixed assets.
o A change in our estimated pre-tax results for calendar 2014 resulted in the reversal of a portion of the income tax benefit we recorded in the first quarter of 2014.

• 2014 and the first half of 2015 will be a significant transition period for SkyWest, and to address the challenges we have made key leadership changes and fleet changes, such as:
o In May 2014, SkyWest announced Russell “Chip” Childs as President, SkyWest, Wade Steel EVP, SkyWest and Michael Thompson, COO, SkyWest Airlines
o In the second half of 2014, SkyWest expects 56 of its unprofitable 50-seat aircraft contracts will naturally expire and the aircraft will be returned to lessors. SkyWest also expects an additional 101 unprofitable 50-seat aircraft contracts will naturally expire and be removed from service by December 31, 2015.
o SkyWest added eight E175 regional jet aircraft as of June 30, 2014, expects delivery of 13 additional E175 aircraft by December 31, 2014 and the remaining 19 additional aircraft by August 2015. With the training and other start-up costs associated with the E175 aircraft launch, SkyWest anticipates the economic benefit of the E175 aircraft will become evident by the second quarter of 2015.
o SkyWest invested approximately $26.8 million for E175 specific spare parts, engines and tooling as of June 30, 2014 and anticipates investing another $10.0-$12.0 million for similar items by the end of 2014. SkyWest also invested $33.6 million into E175 ownership equity as of June 30, 2014.

• Other notable items that occurred during the quarter, or subsequent to the quarter end, include the following:
o We repurchased $5.3 million or 427,500 shares of outstanding common stock
o We settled our outstanding IROP’s suit with Delta Air Lines with no immediate or additional further negative impact to our financial results.

 

[SeanD]

It is the beginning of the end for the 50 seat RJ. Not that we didnt already suspect that.

 

[Overjump]

About 80-90 of those are XJTs E145s. I think 10 or so are gone already.

 

[JustinS]

About 80-90 of those are XJTs E145s. I think 10 or so are gone already.

Yeah I messed that up. I realized after I posted the title it should be 157 50-seaters not CRJs. I don't think they have nearly that many CRJ-200s.

 

[SeanD]

I hear all Skywest new hires are going to the 175.

 

[H46Bubba]

I hear all Skywest new hires are going to the 175.

I saw one of their new 175s in SLC the other week.

 

[typhoonpilot]

So what is anyone's best guess what this means for pilot hiring and movement at SkyWest?


TP

 

[jtrain609]

So what is anyone's best guess what this means for pilot hiring and movement at SkyWest?


TP

ExpressJet is taking the biggest hit with this and has no aircraft coming online to replace aircraft that are being parked. Skywest, on the other hand, is being refleeted.

 

[typhoonpilot]

ExpressJet is taking the biggest hit with this and has no aircraft coming online to replace aircraft that are being parked. Skywest, on the other hand, is being refleeted.

Okay, thanks. Just trying to understand the dynamics here. So what does it mean for ExpressJet hiring and movement?

TP

 

[jtrain609]

Okay, thanks. Just trying to understand the dynamics here. So what does it mean for ExpressJet hiring and movement?

TP

ExpressJet stopped hiring and upgrades indefinitely a few months ago. I wouldn't expect the most junior captain to go any further down the list than it has already, as any further upgrade classes will be filled with people who have bypassed upgrade in the past.

I'm not sure they'll have to furlough, but the L-XJT side of the list will continue to shrink.

 

[Pipes]

Unverified number of planes to be parked (allegedly from the earnings call):

Remainder of 2014
Expressjet - 17 CR2 + 35 E145s
Skywest - 4 CR2s

2015
ExpressJet - 20 CR2 + 59 E145s
Skywest - 22 CR2s.

 

[Kingairer]

Why did they bother buying Xjet in the first place?

 

[Screaming_Emu]

Why did they bother buying Xjet in the first place?

Incompetence.

 

[jtrain609]

Why did they bother buying Xjet in the first place?

I really wish they hadn't.

 

[scooter2525]

As a commuter I welcome the larger ERJs over the CRJ...

 

[crazyjaydawg]

As a commuter I welcome the larger ERJs over the CRJ...

You shouldn't.

50 seaters offer more frequency and more seats. Where you had 2 jumpseats and 100 pax seats split over two different departure times, you now have 1 jumpseat and 76 pax seats happening once.

 

[scooter2525]

You shouldn't.

50 seaters offer more frequency and more seats. Where you had 2 jumpseats and 100 pax seats split over two different departure times, you now have 1 jumpseat and 76 pax seats happening once.

Whats to say some of the routes will be replaced with the ERJs with same frequency?

 

[JOEFRIDAY2]

You need to read the tea leaves here. They have a lot of spin here.

Expressjet went balls out trying to recruit pilots during the 1st quarter. It appears not to have worked. Someone else posted that 81 pilots are leaving Expressjet each month. That is the crew for about six aircraft per month. Expressjet has not been able to replace those pilots.

Skywest lost money during the 2nd quarter. This is at the same time that their mainline partners made record profits. Not a good sign. They most likely lost money because they did not complete flights or did not complete flights on time. Does anyone know how many flights Skywest and ExpressJet have been cancelling per month?

Skywest replaced their President, CFO and COO in May. That is not a good sign any way you add it up. It's a major sign that things are going south in a hurry.

They have announced they are getting rid of 157 (50 seat) RJ's (total of 7850 airline seats) over the next 18 months. This equates to 1,758,400 airline seats per month. Yet they are only adding 40 new ERJ's (total 4080 airline seats). This equates to 913,920 airline seats per month. That means 800,000+ passengers per month (or 26,666 per day) are not going to be able to get on a Skywest or ExpressJet aircraft. That totals 9,600,000 passengers per year that will not be able to feed into the mainline partners. That's some serious cash.

There is a pilot shortage because there simply are not enough pilots willing to work for poverty wages. Expressjet has found this out the hard way. The poverty pilot wages are sinking this airline. Because the airlines are not willing to pay adequate wages to the pilots that fly for ExpressJet they will lose the revenue from almost 10 million passengers per year. It would be a whole lot cheaper to pay the pilots than lose over 1.8 billion dollars in gross revenue from just this one airline.

Unfortunately Expressjet has the short straw and you can see that Skywest is going to deflate this puppy because they have no other options at this time. They will move things to Skywest until they run out of things to move from Expressjet.

Skywest has written down the asset value of Expressjet. That is another bad sign.

It looks like they are going to try to save Skywest at the expense of Expressjet.


Joe

 

[adk]

Whats to say some of the routes will be replaced with the ERJs with same frequency?

How about the fact that UAL is replacing 157 50 seaters with 70 76 seaters?

 

[PropDriver]

Whats to say some of the routes will be replaced with the ERJs with same frequency?

They won't. I've seen it on my commute on Delta. Last summer I had nine flights a day to commute on. This summer I have seven. They're bigger planes, but less frequency. Most importantly, less jumpseats.