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SkyWest Inc. Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

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SkyWest Inc. (SKYW) filed Quarterly Report for the period ended 2010-06-30.

Skywest Inc. has a market cap of $693.6 million; its shares were traded at around $12.4 with a P/E ratio of 8 and P/S ratio of 0.3. The dividend yield of Skywest Inc. stocks is 1.3%. Skywest Inc. had an annual average earning growth of 30.9% over the past 10 years. GuruFocus rated Skywest Inc. the business predictability rank of 2.5-star.SKYW is in the portfolios of Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

We had revenues of $649.8 million for the three months ended June 30, 2010, a 7.0% decrease, compared to revenues of $698.8 million for the three months ended June 30, 2009. We had net income of $18.7 million, or $0.33 per diluted share, for the three months ended June 30, 2010, a decrease of 28.8%, compared to $26.2 million of net income, or $0.46 per diluted share, for the three months ended June 30, 2009.

Our maintenance costs decreased $5.0 million, or 4.3%, during the three months ended June 30, 2010, compared to the three months ended June, 2009. The decrease was primarily related to the timing of engine overhaul events on engines operated under our Delta Connection Agreements. Under our Delta Connection Agreements we are reimbursed for engine overhaul costs by Delta at the time the maintenance event occurs. Such reimbursements are reflected as passenger revenue in our condensed consolidated statements of income. Our Delta engine expense decreased $24.2 million. The decrease in the Delta engine expense was partly offset by an increase in our CRJ 200 engine overhauls reimbursed at a fixed hourly rate. During the three months ended June 30, 2010, our CRJ 200 engine overhauls reimbursed at a fixed hourly rate increased $16.4 million compared to the three months ended June 30, 2009. The increase in CRJ 200 engine overhauls reimbursed at a fixed hourly rate was principally due to scheduled engine maintenance events. We anticipate the number of scheduled engine maintenance events we experienced during the three months ended June 30, 2010 will likely continue each quarter through the first quarter of 2012.

On August 3, 2010, we entered into an Agreement and Plan of Merger (the Merger Agreement) with ExpressJet Holdings, Inc. (ExpressJet) and Express Delaware Merger Co., a wholly-owned subsidiary of Atlantic Southeast, pursuant to which Atlantic Southeast would acquire all of the outstanding shares of ExpressJet. The Merger Agreement provides for the merger of Express Delaware Merger Co. and ExpressJet, with ExpressJet becoming a wholly-owned subsidiary of Atlantic Southeast. If the proposed merger is completed as contemplated by the Merger Agreement, the ExpressJet stockholders will receive $6.75 in cash for each outstanding share of ExpressJet common stock, and the net acquisition price for the ExpressJet stock would be approximately $133 million. In connection with the proposed transaction, we have negotiated the terms of an amended capacity purchase agreement between ExpressJet and Continental Airlines, Inc., which we anticipate will become effective if the proposed transaction is completed. Completion of the transaction is subject to approval by ExpressJets stockholders, regulatory approvals and other customary closing conditions and is currently expected to occur during the fourth quarter of 2010.

Passenger revenues. Passenger revenues decreased $48.9 million, or 7.1%, during the three months ended June 30, 2010, compared to the three months ended June 30, 2009. The decrease in passenger revenues was primarily due to a decrease in fuel reimbursements from our major partners. The fuel reimbursement from our major partners decreased $58.3 million or 47.2%, during the three months ended June 30, 2010, compared to the three months ended June 30, 2009. Our passenger revenues, excluding fuel and engine overhaul reimbursements from major partners, increased $33.6 million, or 6.4%, during the three months ended June 30, 2010, compared to the three months ended June 30, 2009. The increase in passenger revenues, excluding fuel and engine overhaul reimbursements, was generally consistent with the increase in ASMs. The increase in ASMs was primarily due to SkyWest Airlines taking delivery of 18 CRJ 700s since April 1, 2009.

Fuel. Fuel costs decreased $43.5 million, or 33.7%, during the three months ended June 30, 2010, compared to the three months ended June 30, 2009. The average cost per gallon of fuel increased to $2.58 per gallon during the three months ended June 30, 2010, from $1.80 per gallon during the three months ended June 30, 2009. The increase in the average cost per gallon was offset by Delta purchasing the majority of the fuel for our Delta Connection aircraft, commencing on June 1, 2009. United also purchased fuel directly from a fuel vendor for our United Express aircraft under contract flying operated out of Chicago, San Francisco, Los Angeles and Denver. The following table summarizes the gallons of fuel we purchased directly, and the change in fuel price per gallon on our fuel expense, for the periods indicated:

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