SkyWest Swings Back To Profitability Amid New American And United Deals
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Regional carrier in the United States, SkyWest, has turned a profit for the third quarter of 2020. While the airline is not out of the woods yet, it has reached new agreements with American and United on regional flying.
SkyWest turns a third-quarter profit
For the third quarter of 2020, SkyWest turned a net profit of $33.7 million. While this was down from the $91.3 million profit the carrier made in the third quarter of 2019, it is fat better than the airline’s nearly $26 million loss from the second quarter of 2020. But, in the first quarter of 2020, the airline did turn a profit.
Chip Childs, Chief Executive Officer at SkyWest, stated the following concerning the results:
“Over the past several months, we have worked with our partners and our people to respond quickly and aggressively to the worst crisis our industry has experienced. The SkyWest team continues to demonstrate exceptional dedication and flexibility, and I want to thank them for their hard work and focus through this challenge. We are committed and remain laser-focused on ensuring we are positioned for the long-term, maintaining strong liquidity, and delivering on our partners’ objectives in the recovery.”
SkyWest Airlines bolstered its liquidity in the third quarter. The airline entered into a $573 million agreement with the U.S. Department of Treasury for a five-year secured loan facility. This increased to $725 million in October amid other airlines pulling out of loan agreements with the Treasury Department.
A new agreement with American Airlines
SkyWest entered into an agreement with American Airlines on October 29th to place 20 used CRJ700s under a multi-year flying contract. The airline will be using 20 of its own aircraft that are not currently under contract with a partner.
These planes will not enter into service until 2021. Once these 20 go into service, in addition to four CRJ700s entering service in the fourth quarter of 2020 and five in 2021 under a previously announced deal, then SkyWest will be flying 90 CRJ700s under contract with American Airlines.
This also comes on top of a previous agreement for 20 new Embraer E175 aircraft flying for American Airlines. Five of those are anticipated in the fourth quarter of 2021, while 15 deliveries are scheduled for 2022.
American Airlines is working on upgauging its regional fleet, so the CRJ700s will be a great opportunity for plenty of regional destinations that traditionally see CRJ service. American’s regional arm is called American Eagle.
CRJ550s coming to SkyWest…sort of
SkyWest has entered into an agreement to acquire 21 used CRJ550s. These premium 50-seater aircraft will not fly under SkyWest. While the airline will own the aircraft, it is leasing them out under a multi-year agreement for another regional airline that operates United’s regional brand called United Express.
The aircraft purchases and leases are expected to complete in the fourth quarter of 2020. So, while SkyWest will not be operating the aircraft, it will own them.
An update with the Delta contract
Four new E175 aircraft, which will be financed and operated by SkyWest, will be delivered in the fourth quarter that will fly for Delta under their regional arm, Delta Connection. One new CRJ900, financed by Delta but operated by SkyWest, will come to the airline in 2021.
Delta and SkyWest also have a capacity purchase agreement for the CRJ200s that are expiring in 2020. Recently, Delta announced it was moving away from the CRJ200s, with retirements of those aircraft expected by December 2023.
Why SkyWest turned a profit
SkyWest Airlines does not fly its own routes or aircraft. Instead, it flies regional jets on behalf of major US airlines. While, from October 1st, US airlines were set to fly fewer regional services, SkyWest has done quite well for itself thus far.
While the carrier’s total block hours in the third quarter were down 41% from the third quarter of 2019, it still has agreements with the major carriers and has taken over a few routes from the major US airlines. With a fleet of over 400 aircraft, SkyWest has agreements with Delta Air Lines, United Airlines, American Airlines, and Alaska Airlines.
Heading into the fourth quarter, SkyWest should also be in a good position to turn a profit, or at least narrow losses. With the Thanksgiving and December holiday periods coming up, SkyWest will be doing plenty of more flying than the second or third quarter, which will help the airline’s bottom line.
What do you think about SkyWest’s third-quarter results? Are you surprised the airline turned a profit? Let us know in the comments!
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