SkyWest (SKYW) 29 Apr 222022 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the SkyWest Incorporated First Quarter 2022 Earnings Conference Call. [Operator Instructions] Thank you. It's now my pleasure to turn the call over to Mr. Officer. Financial Chief Simmons, Robert Sir, please ahead. go

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

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

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

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

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

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

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

during you, first high and constraint Thank quarter. the everyone. on product the remained Good Thank quarter call crew Rob today. afternoon, we with SkyWest for our joining discussed last for exceptionally Demand you Eric. main imbalance us being the

stronger than million. maintenance at anticipated. to part better efforts income of to slightly net of beginning the was the of The March Omicron anticipated. the than costs after production results better $XX improvement in year, pre-tax of were income our Following first and challenges stabilize after stabilize We the $XX and due industry-wide million the quarter reported -- we

us in into XX months, place the XXX next new service EXXXs to at within year. XX service early expect We EXXXs next by putting

for on several we progress last Our continues long-term a be as our in the years execute priority, to has strategy. been refleeting that

fleet. our first quarter, hours were utilizing flown block the During our dual-class XX% of

pandemic and work the summer. filled is headwinds, a solid, higher pipeline all classes new While to maintain have demand hiring facing transitions robust groups fortunate SkyWest to to the for is as we're through pilot endemic. strategy and

been increase an retirements. have in We mainline for long pilot preparing

However, X,XXX has a imbalance across higher new captains. SkyWest created steep pilots, the in and and at the demand early the the retirements This recovery demand majors resulted industry. for COVID here much demand of during experienced taken regional particularly pilots has

pilot attrition course, for our anticipated and Of was planned strategies. and in models

attrition was However, not. rapid captain increase in

after the pilots industry-wide With industry. the the in return resulted in travel has to demand most the new and sought SkyWest being

last address number we've briefly we steps a discussed taken of to quarter, As this imbalance.

we partners First able and and manage with solid we're to major continue a ensure reduce and foremost, reliable deliver working schedules to product. our to

this upgrades, to carrier But with our career and have our incentives. can with including will programs stability, provide and timing producing strategies and pilot into sustainable both results. opportunity more group and pilot interview our partners for to captain guaranteed constrain group also early disciplined late pilots worked than our have retention implement pilot regional We offering likely production the any Altogether, required imbalance other We're for work Overall, upgrade cabins. already pathways, XXXX. our XXXX programs given provide. options these begun training these

we forward to to reliability investments XX our EXXXs prorate, allow are we prorate model remain within can and flex national Airways, across imbalance. We we connectivity will the Southern so including into medium-sized together our options highest many reduce With more to that deliver game. to and for Transportation and continue of maintain work long rely evaluating to transportation the file -- ensure new aggressively. this ensure these We've existing make with in working next for early the embedded With down we an continued that XX continue up and that utilizing our ways, difficult with operations. the service investment and investment going our help as prorate the flexibility Part options infrastructure. maintain communities, flying an to markets staffing various broader flexibility captains to the significantly to manage our explore We to XX-day to we service air also expect very improvements going reliable by position notice people in through in our the play termination made of imbalance year, and the small to markets strong other XXX on. Department We're so a decision the with other best

for of We our Best for Forbe's teamwork. people their are ability and challenging the in for The Employers year honored work to years XXXX. all couple have together for success. past teams, incredibly of our and XX,XXX our our Large reason nearly of employees is be been thank want dedication to second our with to the running one I

never been the staffing and ongoing monetize product us doesn't the in our has term. for stronger, short demand While refleeting demand current to allow imbalance that

similar progress ways a our improve outlook. to While finding ago, couple in to what months we new the discussed is of environment we've made

expect XXXX We by production XXXX from about previously to reduced production, slightly than be thought. better we X%

with as crew give better to in of the SkyWest, components There will first the the quarter, half in quarter today year great second imbalance. an the us the than three investment. second are the expect confidence be the than lower environment due half We first that

for from global greater demand to is away connection for an medium-sized there These flying, during and areas migrated regional small First, as people massive communities networks. even pandemic. undoubtedly to have the urban need communities

far ability market. third, our in will captains get to pipeline retain than continue train and attract, greater SkyWest our better. competitors our pilot is is value And and we unparalleled and to Second, asset strong the

profitable our over our enhance meet new in at Our in to disciplined approach last this economics assets economy. strong the acquiring ability decade objectives will

taking couple we are of Although, years, we now now next the through choppy, we're the will through for remain we XXXX in expect deliberate ensure the positioned and will Rob over we some remain to work financial recovery and us well data. beyond. aggressive the steps take as headwinds

or GAAP million. first income of earnings net quarter pre-tax reported share. Today, QX $X.XX was per $XX.X million we $XX.X income diluted

Our and diluted our QX in was XX.X rate QX shares, count tax effective for share million XX%. was

First, about XX% XXXX. XXXX. of X% down and from million of $XXX compared from QX, X% revenue up up deferred is revenue QX $XX revenue QX. XXXX GAAP and XX% of XX% down QX, million revenue. revenue up $XX year-over-year. from was QX, other revenue QX, breaks is QX Total million let's QX, and down from QX from sequentially with revenue up XX% of talk 'XX contract released and deferred release million in X% quarter and QX, $XX sequentially 'XX million Prorate $XX from results during XX% These Leasing XXXX. to this the effect was QX, a and in that include down

of As will cumulative periods. have million $XX revenue of of recognized QX, end be future in the deferred we that

reversals depends contract and into will As of discussed the various the last quarter, of cadence the the by flying. shape deferrals our All recovery timing into end of and reversed periods. be future the revenue revenue amount revenue on or of deferred

from to the $XXX cash with We balance Let flat $XXX me quarter essentially million, of move ended million the last quarter. sheet.

be million to fixed XX new and new QX purchase Our of debt slightly aircraft approximately XXXX. quarter XXXX. million, for billion, aircraft $XXX was compared EXXX in $XXX of CapEx of $X.X XXXX the as We other Total with billion, $X.X during $XXX first EXXX assets. expected CapEx four million the including to ended up year-end is from

low sheet our government that the we only a PSP balance loans. coupon in million $XXX on no debt Just amortization, is unsecured have total of reminder a XX-year

Let things a of me about liquidity. couple say

As before an $XX financing adding our cash quarter $XX for of of March debt new financing. and of million XXXX, the $XXX this in million million of XXst, effect having of four million EXXXs position engine repaid $XXX incremental included debt

collateral liquidity, ever that also over needed. be $X could of billion for deployed We additional if have unpledged

of QX, of than XXXX. at end XXXX, As our was is pre-COVID the it net cash debt end of lower the balance of

from especially but the times to time, in a little with and in service that specific no and Additional let fact this aircraft, this EPS volatile give in has of like XX% guidance give our any me including financing color. not flexibility are we partner-owned now you a obligation, our comes at practice, fleet policy over consistent position

schedules Chip, QX. a place The expect reasons by aircraft demand earlier monetized referenced that variety XXXX could to that First, we be at QX We show than results strong currently than production our time, better we better will this in we and type Last likely expect that breakeven opportunistically. thought quarter, XXXX to and were QX better earnings be schedules profitability. would optimizing expected now this thought quarter. year. last for QX including slightly indicate we than of profitable be by

half second the The of XXXX, will don't until attrition. have XXXX. the likely half this second projected of expect because back mitigated of We worse with the profitable 'XX, challenge half than breakeven half to 'XX approximately be of imbalance captain however, pilot to of slightly first

XXXX XXXX we that limited XXXX less estimated than the we still we would closer XXXX. in believe We down down by block to thought compared hour be be for compared Last hours while X% quarter to imbalance. to Second, to block quarter, be production, expect XXXX. could number production down pilot last that to being XX% XX% staffing now

pulling down ERJ some to focus expect continue of fleet our to We our fleet. on CRJ and growing

with we full the the year strongly pilot continue pipeline accretive the a to the and going We XX the affecting expect EXXX the Fourth, in ERJ of believe into now work growth monetizing until optionality demand XXXX in new Wade? will on in regional spite liquidity accretive we see impact strong aircraft opportunities end EXXXs sector. and fleet, the through of XXXX our XXXX. of and we preserve of actions cash year. industry Third, over XX service focus the 'XX will us early won't balance strong new position taking in that time of invest delivery this to strong imbalance a to are

production a and an provide on our status update I'll businesses. prorate well and Rob. you, Thank as as update, fleet leasing

long-term quarters. delivery SkyWest-owned in American XX this aircraft, anticipate beginning as of XX contracts under EXXX new year with into be have strong EXXXs the the in schedule XX first scheduled a of these this an throughout have with for Delta service year, discussed middle recent new Under to After for XXXX. will continue service EXXXs announced placed contract, We older XX Delta. through replace these our previously will we year. agreement we this We receive We EXXXs we we CRJXXXs. part

have during quarter and the of middle receive of fourth XXXX, the received year. XX this third and in those will We two of aircraft

add Alaska to have EXXX agreement We an our XX contract. with to

aircraft XX into Alaska. under long-term of aircraft the of one to place product service for very EXXX XX total year those half expect during our and first for this remains of with XXXX demand contracts strong. We Clearly, a more

Following be delivery of those currently will on XXX aircraft. order, fleet EXXX our

Let second from and current up major me our our from review for the have of block will XXXX, slightly the schedules we quarter. our quarter Based current production. partners hours anticipate we the that be first on revenue

our be we block half to QX, of year. the look from hours we anticipate As first down that second will half this

Let little prorate about me business. our talk a

is we into and we've As model a flex intentionally for resources. meet operating the our product, down flexibility have our that ability built impacting our to our up discussed, experiencing demand strong and are with we fully prorate crew to imbalance

air a during service one a was to filed we notice As would preferred this make. DOT result with first discontinue essential the imbalance decision to a quarter, and we have XX-day not difficult to service communities. very This the XX of

been We years. several for most communities serving of these have

remain continue for We working solution good communities. a and this helping to committed these through challenge find

XX business and engine leases anticipate returning, under and XXXs under we under Southern year. airline, to long-term parties. and line flow Additionally, leasing to good business, for these strong Airways, a of our to is we Part as with this Part engines own Shifting CRJXXXs cash XXX XXX leasing third has a Chip characteristics. several leases placing currently have Demand explore viable business gears we airlines communities. said, and for of flying very work with towards long-term ways we This margin additional part solution our expect

We our have continue a and we'll efficiently delivery mix. to year, optimize working allocate strong our as we schedule fleet this resources,

positioned. each to We risk a we enhancing creative major provide are spent our for differentiator to and flexibility years flexibility our the last us, be This we're fleet partners financing several continue have solutions. will well with reducing continuing work committed to and ensure and to of

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

[Operator the Instructions] question Your Syth from line James. Savi first with comes of Raymond

Your line is open.

And turned if of other there Or from months the update out things better better, Or attrition looking the because if kind those rates turned reason when an along some going you were a kind about getting or you if pilot sitting perspective? I for your outlook you of on are kind pilot and block worse? you the earlier was just or could versus Just three months few better? kind was it off of training lines, is that of than hour, ago that out production hiring that give ago? are was thinking how this wondering, better it or year, of

this Wade. answer I'll question. Savi, is block hour the

little that our allocations based this bit some of kind able optimize We've to do we're we of anticipated. through quarter some of As changes block of hours how of we're going we did and mix a some in found went to model. it also some and stabilization lots fleet -- flying, on

be it's so a bit more block our to hours helpful able to And predict us accurately. for little been

is only about Chip. second but would relative question would talk last up again Each will summer don't we that ever -- this To I this say be the basically months I to Savi, a in flat since it the about it, a we your We pick attrition, running And relatively quarter. and ton consistently. lighter, strong talked we then fall. anticipate will of are bit it we're

some just are. of we general that's So where direction

said, outpace being of we able be All to our that pipeline. it to continue through

enough at a for sure be flight we continues is aggressive point, that get the become this about about something And time of imbalance so FOs the making but to it's we mathematics captains. to addressing, -- lot are

Can up follow Chip. I that, on

issue, -- enough really are just kind invest in make or the it then is to need about FOs kind to do time so training the door? larger? that you pipeline? kind spend to is have Or of the kind timing you you Just and to of And footprint in a build it -- of getting captain of as --

the is Yes. time. thing major Savi,

to a at with back the demand when combined this you carriers. flying, If like said, of not mean, I go I the retirement. lot massive generated X,XXX doing we is pandemic major were just And

have we be of we the some a working a experience take will through that's going officers these to the enhance captains. but All got how of say first the strong a here, opportunities to to our we've of programs in year. storm. care extremely rest -- perfect this of lot There to time component upgrade is to time is that this We creating a approach. officers captain get to make And be for major our the will a that SkyWest, I that of bit can and continue to dial be it day on work aggressive complement to to as be we first of to But need move a for at We're we continue of sure do upgrade. could captain. good

that, to Chip. one follow-up Just

go something costs that are in a that and you kind expense time, in -- do that of eventually cost? through? in contracts will that partners sharing of near on Or of kind that, kind the a that term, as is the higher as be get pass see that the negotiated Just is over

captains. nature, It I do would engaged the this to that is are we contract. but demand partners not as recovery pain process have we for And of like we are would going that be manage to with a will strong suggest strong, the of short-term have in very things our as some to immediate certainly going well. how strategy in is we

and question, we I the also do to problem. capacity a games long emphasize to wanted training also usually not for going is this long-term previous Back we're for so your to look do. sustainability it And

SIMs officers have our experience relative the any We This is constrained mostly sure to the in or get nature. any we for just what -- to is, is the facilities be not going or upgrade. of outlook first we're that to making of

Your next question Catherine [Operator from O'Brien. Instructions] comes

Sorry.

from from question again James. comes Savi with next -- Syth Your Raymond

with? the guess in kind of is option to I did an XX to XXX partner But you just something -- are just stake there flying kind areas. is had SkyWest? Or of with? is And bring a partner more view realize just of looking on I that Part that to Southern kind Just XXX that in options, a Part you that within

So fundamentally, XXX certificate. we're a certificate. XXX a We not do have

them So a we and operators within have actually pipeline. utilize have our XXX very of existing -- we with been working lot strong

unfortunately we we pull strong are to impossible obligations those just some -- out had our cities, the profitable to profitability, XX It's markets. serve to of with we contractual great of, when notify mentioned, the Wade that of to As that the these had Department needed cities these were had. Transportation, other

So the to be of emphasis at we these are is quality be of process, to make have invested millions cities, dollars to markets. safety and going our sure level we've in of and leaving served communities tens through went candid, when of because these we that hate all same we well the these

a don't it's So fly we've backfill that thinking product. builds. CRJXXX And operators with plenty that with And of our asset operators of been XXX CRJXXXs, are are know, decades, continues of that leader that We've operators got probably we'll engine but are to some things we've anticipate some several anything for with to of you relatively to of lot doing. next pilots, time, things that been here. And some do and extent and can could help -- of the been you some and and -- not some utilize help XXX we've still the enhance They're with as today. opportunities certified to doing early, backfill we XXX a assets, the quarter the supplying update it's paid opportunity more the great we at be on CRJXXX. product good still smooth there to for those here. there's have it we have transition, But this existing there to some with working the we and it

and mentioned, Chip, near-term you're just XXXX, any kind does the some kind normalize of see you But of partners And some like cause that the pandemic, kind we do will of industry was the there as Or for implications maybe 'XX kind -- of point. changed. will coming issue, are this in what there you of It rules of does a a result it's of kind at be of for more? taking a CRJs coming today? longer-term frame And about thinking of time kind any -- several of last this XXXX seem step longer-term does how kind through a gone that, -- of how it -- out kind -- like does of time of when seeing as consolidation out this? many is XXXX, back, implications? are has many chance shifts flying

there's lot there, look I'll I'll try try to I to address so there's of can. -- Well, lot in possibly -- questions a many a as as

I train that's XXX but than looking think that part hours pilots, happening to points, level we think to rule, where a would we we're that because don't that captains remains with X,XXX a it situation address in going that also operators put the many particularly probably trained D.C. us, the a necessarily any there's flexibility the is probably areas lot same We other earlier don't. we XXX certain different in are reality there. time, seen. be area. servicing now. CRJXXX given we Back is move CRJXXX, what how certainly XXX that flying rules But we're your with didn't captains out with those, that to be terrible if to that in these be -- actually of asked, make modify think not operators to have But cities. aggressive more of you said by potential some in, what way at existing some to component what's I in law, of of a the of think a one is exceptional And of of are the better a could multitude I in in XXXX going to it's we're and be But we this. some they do. like going latter operators earlier, to of but to CRJXXXs have have captains

there's a -- yes seen future. think near -- be a class the aircraft remain lot to I think So with I be single mean, to in I

Going though, for probably is by cities my extraordinarily going point, main small demand is to get the strong stronger and back XXXX. to

came are maybe a might expecting a Was question if And any I about looks We it down that fly is were you come side. the how improvements helping. well, on the just on little last Or as maybe maintenance less timing kind of down. ask some that's thinking And of to issue? maintenance you one then It maintenance seeing you're like bit trend? faster. as it just

this Wade. Save, is

we've So been see flying doing, in of about down to quarters. optimizing we've last think the fleet, in been rest coming very investments been maintenance -- We've past years we're for for engines made that. and yes, our our our And starting in large the the talking the optimize dividends the our be and will of as several both of expense over expense couple airframes, our to year. -- of we've fleet maintenance we what what part also we -- we've engine

And throughout so levels continue of the maintenance to approximately rest see will yes, we the year. at these

and just then, Rob. maybe last question one And for apologize I

for of kind cash longer take to just I of here thoughts have Just recover. it that and but wrong. capital down CapEx the a come use flow things given bit little maybe to kind expectations, that on revised have of Any seems might

this CapEx Obviously, got new very obviously number the million changes, that CapEx this of is than we've little new deliveries, normal excited that Savi. about, do which we these expect a are I we're real mean XX to for given of heavier reasons. EXXXs year. plus bulk year, great of the but No $XXX the

the Your Goldman Sachs. next O'Brien with line comes Catie of question from

Your line is open.

Good afternoon, everyone.

anxious that. again got I -- and a accidentally star here. quite I'll Sorry was I ask about I pressed but of but the out few took pressed one myself one, and queue,

So I'll get started.

this guess, your just to this follow-up I like that Savi's us improvement exactly I call just major optimize reduce able first, pretty you in been shortage were guess, every of -- XX-point a season. Can to your some terms feels So that, a pilot on in allocation, like you question. theme what details on like you significant. give a aircraft to there's able for block hour year, production more just

I the So guess that's first one.

Yes.

is Catie, So Wade. this

going we're So was just the good our be looked at -- are we're training both that going the to to other did quarter aircraft can, are folks, footprint most made how training that progress some going where footprint airplanes putting training sure efficient the and we flying footprints we've say this made we're decisions be doing, out types. it's flying them what and training what are during we be making biggest aircraft thing to and we're what in, optimizing and we we on helped some very I to some on these levels our and

and And to training footprint we're training just is airplanes of footprint, our with prioritizing pilot be the professionals so it a can. through getting going lot as which as quickly really we the

and are ability attrition puts to training seeing your there on takes, your trends basis? be back on a going build think do going block to to when have footprint to production? know you'll you're the the and longer-term and pipeline, given a now Okay. pilot of then smaller but And chance an a lot you're roughly I be XXXX is a to hour you there company get fairly Or then

question. our that's for to is wide Catie, great range I perspective think And a be So This of Chip. prepared is outcomes. a that

I data what from of we've in when attrition we that a late that as at math pipeline pilots comfort hiring coming in we're the have works we XXXX. existing the way pandemic, going what as recover first well and around officer models kind of indicated get need into within you out data think look upgrades the the the pointing starting the we script, and and the a can under level on, focused particularly is XXXX

you XXXX, So can lot that also, in than XXXX at aircraft. a that single entirely Catie, a point, aircraft, class different lot less imagine it more fleet in our looks did dual-class

disciplined strong think range the time flexibility our want main and to long of again, to that have to Demand tooled on to we're at capitalize our take determine it's wide economy, is the well is, right that I that good looking aggressive particularly these this element the side think us good are driving business a some given well a a XXXX. priced, as do here from as assets make we're So I by are of challenges. very things through some things, look we And perspective, we at and and financed opportunities. in from perspective us sure what to get can we some on our we

Okay.

force margins, about what it hour block trajectory of see know end you've maybe and color right, some there's to theoretically per XXXX revenue are to that to given XXXX production? the chip. to like come till recognition but so takes? some fact we system the to I rule we And to a your the I Do takes back this we get love costs get higher to hereon like back from to the what share that's black that as the earnings back the back could we but out hour is get given get your Or point, us of closer some smaller, thoughts. need production? addition deferred dual-class concentration, your of profitable coming question XXXX and on packed more a and aircraft before margins for we shortage the rule to know shared other a labor -- out of have so wait made that hindrances year, adjustments in puts you've XXXX

Well, hey, Catie, this is Rob.

reminder a just got the right that keep would that biggest say the I again, strong we now, referencing. demand that is tailwind we've So

this demand-driven not point. resources. it's constraint a So It's of at a shortfall

as of We're a standpoint, good going different happening. or next we're start our in term. are putting year margin The again, we're lot there and I So two structures labor long the things to into that for next are few our we talked a from there's airplanes cost to about, think have question years, service of about sort XXXX. to through that. But the investing over results reading going starting the no

look, be when mean, good things you we're position invest a back that to able lot and that if our long there's able margins game to to aren't in for can seeing can't of or XXXX maybe you that others that we're way a I I tell levels. tell be there, a in I do. out But So to will

could. if more, one then And I

I think for Wade probably.

Just to some well-priced with on points so just lease opportunities think Chip's offset the leasing to some what trying now, is a of over with. you you've through give of to like? on us demand, then an potential you availability aircraft see are bit maybe looking driving or mentioned But also do during just to like look the do two speaking more you decisions growth assets, prepared update this engine if you right look some pilot some third-parties I'm opportunities aircraft there supply engines, think pool and tight next know remarks. to you're year another incremental there's you the but one got I can your where on opportunities, of the for business is

here So just any be would great. color

Yes. Catie, this is Wade.

of couple opportunities. of new a there's So kind interesting and

carriers said, reaching of out XXX over asset are country Chip XXX there, are definitely about years. our for As a -- As us airline of opportunities best we've They've kind we different maintained to these CRJXXXs explore have extremely well XX existing base, the the started by in right? priced. to out that been

agreement. have We the engine best

just from with I'll strong, small And lot is interest have that don't And OEM. associated extremely a and also a power very very our associated fleet these the so CRJ They have engine engine have there's right? -- the lot good in of -- we airlines size of been airlines fleet. tell we buying that that a you, And lot of platforms. demand with the with agreement good smaller our a

opportunities lot are XXXs, are -- those XXXs, is of years. at from engines are investments good interest during us. engines we from for we wave coming right leasing two prepared during hopefully, those, very during avoid helping that those invested probably the heavily that in events And in made a well the for their us. industry there couple as very the we've other you SkyWest has are in a large wave very on next look their of potentially the And XXXX, there could airlines so and XXXX, engine through that. very those in by for them had of then events And the large and And they engine model, XXXX,

on And CRJXXX the so there then are both some out pretty to there, associated the opportunities XXX good and XXX. our engines with

turn to time. to at this Chip I back the call Mr. questions are like Childs. no would There further over

again, saying for you Thanks, joining and the call us the strong, long to and in I your by really despite resources call, their to people continued is the you. you facing, want navigate we'll we We headwinds end Brent. on we'll to And SkyWest. great talk that flexibility. for Thank appreciate thank and today. game. next quarter. have work I'll we're close interest With that, strategy demand, Thank the the our and again, all

for gentlemen, This participation. thank concludes and Ladies you your call. today's

now disconnect. You may