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Skywest, Inc. Announces Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

St. George, UtahSkyWest, Inc. (SkyWest) (NASDAQ: SKYW) today reported financial and operating results for the quarter ended September 30, 2015.

SkyWest generated $36 million of net income for Q3 2015, or $0.71 per diluted share. Excluding special items, SkyWests net income for Q3 2014 was approximately $26 million, or $0.50 per diluted share.

Operating income for Q3 2015 was $78 million, an increase of 32% from Q3 2014 of $59 million.

SkyWest reported $77 million of net income for the nine months ended September 30, 2015, or $1.49 per diluted share, a $88 million improvement from the corre sponding period of 2014, which had net loss of $11 million, excluding 2014 special items.

Commenting on the results, Chip Childs, SkyWest, Inc. President said, Our third quarter results reflect continued progress in the optimization of our fleet and flying contract mix. These improvements, along with solid operating performance, have contributed to our increasing operating margins. Additionally, we look forward to operating the E175 aircraft with three of our major partners by mid-2016, and we believe our operating performance continues to create additional opportunities to improve our fleet mix and operating margins.

Q3 2015 Financial Highlights

Operating margin increased to 9.9% in Q3 2015 compared to 7.1% in Q3 2014. The improvement in operating income and operating margin was primarily due to additional flying contracts with improved profitability, improved operating performance and a reduction in the number of aircraft operating under unprofitable or less profitable flying contracts.

SkyWest generated $145 million in cash from operations in Q3 2015, compared to $129 million in Q3 2014, excluding special items in 2014. For the nine months of 2015, cash from operations was $314 million, compared to $161 million for the nine months of 2014, excluding special items in 2014.

Q3 2015 revenue included the benefit of $31 million from additional Embraer dual-class jet aircraft (E175) operations, improved contract rates from renewals of SkyWests existing flying contracts, improved contract performance incentives, and $4 million from higher flight completion rates compared to Q3 2014. These improvements provided a significant offset to the revenue

decrease from a reduced fleet size and lower scheduled production levels from Q3 2014. Total revenue of $794 million for Q3 2015 decreased $41 million from Q3 2014.

Operating expenses were down by $60 million, or 7.7%, compared to Q3 2014, primarily driven by operating efficiencies from improved completion rates, a net decrease in production, maintenance cost initiatives and a reduction in fuel costs.

Q3 2015 Operational Update

Flight completion rates improved in Q3 2015 year-over-year at SkyWest Airlines, Inc. (SkyWest Airlines) and ExpressJet Airlines, Inc. (ExpressJet) as follows:

SkyWest Airlines

Q3 2015

Q3 2014

Adjusted Completion

Raw Completion

Adjusted Completion excludes weather cancellations. Raw Completion includes weather cancellations.

Total aircraft in service at September 30, 2015 was 656, a net decrease of 84 aircraft from September 30, 2014 of 740 aircraft. Changes in SkyWests fleet mix are as follows:

Added 26 new E175 aircraft with United Airlines (United)

Added three new E175 aircraft with Alaska Airlines (Alaska)

Added twelve used CRJ200 aircraft with Delta Air Lines (Delta)

Added 16 used ERJ145 aircraft with American Airlines (American)

Combined, 57 aircraft were added year-over-year

Removed 36 EMB120 30-seat turbo-prop aircraft (EMB120s) from multiple partners

Removed 69 ERJ145/135 aircraft from service from United

Removed 36 CRJ200 aircraft from service with multiple partners

Combined, 141 aircraft were removed year-over-year

SkyWests aircraft in service decreased by 20 net aircraft from June 30, 2015 to September 30, 2015, with changes in fleet mix as follows:

Added five new E175 aircraft with United

Removed eleven ERJ145 aircraft from service with United

Removed 14 CRJ200 aircraft from service from multiple major airline partners

Under its fleet transition, SkyWest generated approximately 24,800 additional block hours with its dual class aircraft (CRJ700s/900s and E175s) during Q3 2015, compared to Q3 2014. SkyWest also had a reduction of approximately 89,000 block hours with its less profitable 50-seat and smaller aircraft (CRJ200s, ERJ145s/135s and EMB120s) during Q3 2015, compared to Q3 2014.

Under an agreement announced in Q3 2015, SkyWest Airlines is scheduled to place 18 additional new E175 aircraft into...