On Thursday, SkyWest (NASDAQ:SKYW) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Access the full call at https://events.q4inc.com/attendee/179256265
Summary
SkyWest reported a net income of $102 million or $2.50 per diluted share for Q1 2026, slightly better than the previous year, driven by increased production and fleet utilization.
The company continues its strategic fleet initiatives, including the introduction of the CRJ450 for United and the conversion of CRJ700s to CRJ550s, with plans to expand the E175 fleet to nearly 300 by 2028.
SkyWest reduced its debt by $1 billion since 2022 and continues to focus on fleet growth, debt reduction, and share repurchase, with $138 million remaining under its current buyback authorization.
Operational highlights include high on-time performance despite challenging winter weather and strong demand for prorate services, with plans to expand service to underserved communities.
Management provided a cautious future outlook, anticipating slightly lower block hour production this summer and a GAAP EPS of around $11 for 2026, affected by elevated fuel costs.
Full Transcript
Abby (Operator)
Thank you for standing by. My name is Abby and I will be your conference operator today. At this time I would like to welcome everyone to the SkyWest Incorporated first quarter 2026 results call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. And I would now like to turn the conference over to Rob Simmons, Chief Financial Officer. You may begin.
Rob Simmons (Chief Financial Officer)
Thanks Abby. And thanks everyone for joining us on the call today. As Abby indicated, this is Rob Simmons, SkyWest Chief Financial Officer. On the call with me today are Chip Childs, President and Chief Executive Officer, Wade Steele, Chief Commercial Officer and Eric Woodward, Chief Accounting Officer. I’d like to start today by asking Eric to read the Safe Harbor. Then I will turn the time over to Chip for some comments. Following Chip, I will take us through the financial results. Then Wade will discuss the fleet and related flying arrangements. Following Wade, we will have the customary Q and A session with our sell side analysts.
Eric Woodward (Chief Accounting Officer)
Eric, today’s discussion contains forward looking statements that represent our current beliefs, expectations and assumptions regarding future events and are subject to risks and uncertainties. We assume no obligation to update any forward looking statement whether as a result of new information, future events or otherwise. Actual results will likely vary and may vary materially from those anticipated, estimated or projected for a number of reasons. Some of the factors that may cause such differences are included in our Most recent Form 10K and other reports and filings with the Securities and Exchange Commission. And now I’ll turn the call over to Chip. Thank you Rob and Eric. Good afternoon everyone. Thank you for joining us on the call today. Today Skywest reported net income of 102 million or $2.50 per diluted share for the first quarter of 2026. This is slightly better than the same quarter last year and reflects increased production and fleet utilization. During the quarter we received delivery of 1E175 with 8 more expected this year. We are also excited to share a prototype of the new CRJ450 product, a reimagined premium 41 seat CRJ200. This aircraft will include first class overhead bins large enough for all rollaboard luggage and Starlink Wi Fi. SkyWest is very excited to launch this new product for United this fall and we look forward to ultimately operating an all dual class fleet. The first quarter is Always difficult with winter weather, our people rose to the challenge despite two back to back storms in March affecting several of our hubs during the first quarter, the Department of Transportation shared their full year 2025 on time performance statistics with SkyWest Airlines placing third in on time performance. That’s outstanding and I want to thank our people for working together to deliver such an exceptional product. The industry is extremely dynamic and and our model is built for durability. With uncertainty impacting fuel costs and production, we still anticipate 2026 will be more profitable than 2025. SkyWest strategic business decisions have kept us strong and agile to the industry’s volatility and the steps we’ve taken in the past several years have only enhanced the strength and stability of our model. Our ongoing investments and and in the diversity of our fleet ensure we’re well positioned to adapt to market demands. We continue executing our fleet initiatives and advancing our unparalleled fleet flexibility. That flexibility has never been more important and while our E17 flying agreements are further solidified, we continue to leverage our extensive CRJ assets. The contract extensions we announced with United and Delta last quarter deliver ongoing revenue stability and with our dual class fleet, Both CRJ and ERJ now under contract, we have no major E175 contract expirations until late 2028. We continue accepting delivery of new E175s, converting CRJ 700s to CRJ 550s for United and are proud to be launching the CRJ 450 with United this fall. Additionally, we’ve continued to reduce our debt and we now have $1 billion less debt than we did at the end of 2022. The free cash flow that we continue to generate is still being directed toward fleet growth initiatives, debt reduction and share repurchase. Our steadfast commitment to maintaining a strong balance sheet and liquidity benefits our employees, our partners and our shareholders. All of this work sets us up well for 2027 and places us in a solid position of long term strength. SkyWest continues to lead our industry in service and in the value of our diverse assets. We remain disciplined and steady as we execute on our growth opportunities by delivering on significant prorate demand, investing in and fully utilizing our existing fleet and preparing to receive our deliveries in the coming years for a total of nearly 300 E175s by the end of 2028. SkyWest is built to perform through the industry’s cycles. Disciplined strategic choices and continued execution in recent years have strengthened our model and we remain well positioned to adapt quickly and to respond to market demands better than anyone else in the industry. Rob will now take us through the financial information.
Rob Simmons (Chief Financial Officer)
Today we reported a first quarter GAAP (Generally Accepted Accounting Principles) net income of $102 million or $2.50 earnings per share. Q1 pre-tax income was $108 million. Our weighted average share count for Q1 was 40.7 million and our effective tax rate was 6%. This GAAP (Generally Accepted Accounting Principles) EPS included a 29 cent impact from this unusually low effective tax rate from a discrete benefit in the quarter compared to the Q1 rate last year. Let’s start today with revenue. Total Q1 revenue of 1.01 billion is down slightly from 1.02 billion in Q4 2025 and up 7% from 948 million in Q1 2025. Q1 revenue includes contract revenue of 810 million, up from 803 million in Q4 2025 and up from 785 million in Q1 2025. PRORATE and charter revenue was $168 million in Q1, up $1 million from Q4 2025 and up 37 million from Q1 2025. Leasing and other revenue was $35 million in Q1, down from 54 million in Q4 and up from 32 million in Q1 2025. The sequential decrease in leasing and other revenue from Q4 related to discrete maintenance services provided to third parties in Q4 that was not expected to repeat in Q1. Additionally, these Q1 GAAP (Generally Accepted Accounting Principles) results include the effect of recognizing $24 million of previously deferred revenue this quarter, up from the $5 million recognized in Q4 2025 and $13 million recognized in Q1 2025. As of the end of Q1 we we have $241 million of cumulative deferred revenue that will be recognized in future periods. Now let’s discuss the balance sheet. We ended the quarter with cash of 627 million, down from 707 million last quarter and down from 751 million at Q1 2025. The ending cash balance for the quarter included the effects from repaying $116 million in debt, issuing $118 million of new debt, investing $102 million in capex, including the purchase of 1E1755 and buying back 783,000 shares of SkyWest stock in Q1 for $75 million as of March 31, we had $138 million remaining under our current share repurchase authorization. Cash flow is obviously an important driver of our capital deployment strategy. Over the last two years we generated nearly $1 billion in free cash flow and deployed it primarily to delever and de risk the balance sheet to the benefit of our partners, our employees and our shareholders. We expect to continue to deploy our ongoing generation of free cash flow by investing in our fleet, including financing the addition of 28 new E1755s by the end of 2028, reducing our debt and executing opportunistically on our share repurchase program as you saw us do in Q1. As we remain focused on improving our return on invested capital, we’d like to highlight the following Both our debt net of cash and leverage ratios continue at favorable levels and are at their lowest point in over a decade. Our total debt level is $1 billion lower today than it was at the end of 2022, in spite of acquiring and debt financing 15 E1755s during that time, the total 2025 capital expenditures of funding our growth initiatives was approximately $580 million, including the purchase of seven new E1755s, CRJ900 airframes and aircraft and engines supporting our CRJ550 opportunity. We expect to take nine new E1755s during 2026 and anticipate our total CapEx in 2026 will be about flat with 2025 including two incremental 175 deliveries consistent with our practice. Let me update you on some commentary on 2026 that we gave last quarter. For 2026, we now expect to see block hour production slightly lower this summer than we modeled last quarter. We continue to work with our partners on production schedules over the rest of 2026. Wade will talk more about this in a minute. We also anticipate our GAAP (Generally Accepted Accounting Principles) EPS for 2026 will be in the $11 area, slightly down from the color we gave last quarter, reflecting our expectation of ongoing elevated fuel costs. Although the future cost of fuel is obviously uncertain, we are exposed to fuel costs only on roughly 10% of our flying or 40 million gallons needed in our prorate business over the remainder of the year. We also believe, however, that higher fuel costs will come with some favorable prorate pricing offsets in that business along with ongoing strength in our core model. In terms of how to think of quarterly EPS modeling for the rest of 2027, there are several potential puts and takes over the remaining quarters, including seasonality, fuel cost, production, and so on that have various levels of uncertainty. But to keep it simple on a GAAP (Generally Accepted Accounting Principles) EPS basis. We anticipate directionally that Q2 could be up slightly from Q1 gap results of $2.50 Q3 seasonally, the strongest quarter of the year could be up over Q2 and Q4 could be down modestly from Q3. For other modeling purposes, we anticipate our maintenance activity in 2026 will continue approximately at 2025 levels as we invest in bringing more aircraft back into service. We also anticipate our effective tax rate will be approximately 23 to 24% for the full year 2026, flat to slightly down from 2025, including the unusually low rate of 6% in Q1. This is expected to translate to an effective tax rate of approximately 27 to 28% for the remaining quarters of 2026. We are optimistic about our ongoing growth possibilities in 26 and 27, including the following three focus areas. First, growth in our ability to increase service to underserved communities, driven partially by the redeployment of approximately 20 dual class CRJ aircraft expected for scheduled service later this year and strong utilization of the existing fleet second, good demand for our prorate product and third, placing nine new E1755s into service for United and Alaska by the end of 2026 and 16 new E1755s for Delta in 2027 and 2028. We are also very pleased with the success of our CRJ550 and CRJ450 initiatives and I will hand the mic to Wade who will talk more about that next. We believe that we are positioned to drive long term shareholder returns by deploying our strong balance sheet and free cash flow generation against a variety of accretive opportunities.
Wade Steele (Chief Commercial Officer)
Wade thank you Rob. During the quarter United announced the launch of the CRJ450, a reimagined CRJ200 featuring 41 seats. This aircraft will offer seven first class seats and 34 economy seats including economy plus. With a large luggage closet and no overhead bends in the first class cabin, passengers will enjoy a premium experience. We’re also excited to introduce Starlink connectivity on board the CRJ450. Operations with United will begin this fall. Last year we announced an extension covering 40 CRJ200, hundreds with United and we are committed to retrofitting these aircraft into CRJ450s. We also plan to retrofit our Pro rate fleet and anticipate that our total CRJ450 fleet will reach approximately 100 aircraft. Turning to our E175 fleet last quarter we secured multi year extensions for 40 E175s with United and 13 with Delta, further solidifying our partnerships through the end of the decade. We now have no contract expirations on E175s until the second half of 2028. During the quarter we took delivery of a new E175 for Alaska and currently have 68 E175s on firm order with Embraer including 16 for Delta and 8 for United. We expect to receive 8 additional E175s this year. Of the 68 aircraft on order, 24 are allocated to major partners with 44 remain …
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