SkyWest records first quarter profits amidst leisure rebound

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As US airlines continue to model their operations towards an optimistic outlook on leisure travel, one well-known US-based carrier is turning in healthy quarter profits in a Covid-restricted market. 

SkyWest Airlines, a regional carrier based in Utah, United States, recorded a net income of $36 million in the first quarter of 2021. The airline’s total first quarter revenue was $535 million and total operating expenses $454 million. The carrier’s operational model, which differs from the traditional model, is based on overhead costs from fixed-fee contracts on flights it operates for other US carriers such as American Airlines (A1G) (AAL), Alaska Air (ALK), Delta Air Lines, and United Airlines. The model saw the airline turn in two profitable quarters in 2020.

As of March 2021, the carrier operates a fleet of 193 Embraer E175s and 267 Bombardier CRJs, broken down to 137 CRJ200s, 98 CRJ700s, and 40 CRJ900s.

The carrier’s first quarter earnings success can be attributed to the payroll support programs offered by the US government. For the first quarter of 2021, the airline posted a net income of $36 million which included a $193 million pre-tax benefit from the support program which offset labor expenses. Future earnings project the airline to benefit from additional grants, set to receive $285 million in additional funding this quarter from which $230 million will be in the form of support grants. 

The rebound in leisure travel, recorded in February 2021, is good news for SkyWest’s (SKYW) model of which 80% to 90% of its generated revenue comes from fixed contracts with other carriers which are paid on a flight-by-flight basis. The contracts are independent of the actual revenue generated on the flights.

SkyWest’s (SKYW) Embraer fleet of 193 E175s held a bulk share of its block hours in Q1 2021, with a little over 128.5 block hours. The Bombardier fleet held a combined total of 147 block hours where the CRJ 200s held 60.5, CRJ 700s 63.1, and the CRJ 900 24.0 hours. According to reports, the carrier is operating 30 more E175s at the end of the first quarter of 2021 as compared to the end of the first quarter of 2020. The carrier expects to increase its block hours by 10% this quarter. 

Plans to expand the E175 fleet are underway. By mid-2022, the carrier will operate 213 Embraer E175s, up from an initial Embraer fleet count of 156 in 2019. A contract with American Airlines (A1G) (AAL) will see SkyWest (SKYW) restore 25 CRJ-700s from long-storage back to operations in the remainder of 2021. 

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