SkyWest Inc., one of the few in the industry to make a profit in the last year, is the biggest U.S. regional airline. The corporation has been supported in several ways by aspects of its business model and government compensation pay.
Like several airlines, during the COVID-19 pandemic, SkyWest suspended some of its operations. However, the company started to raise the number of flights in the third quarter. Flight operation decreased by 40 percent year-on-year as a consequence (the decrease was 55 percent in the second quarter). SkyWest benefitted from a payroll assistance scheme which offset the company’s wage expenses during entire of the downtime. As a result, SkyWest was able to repost a quarterly profit of $34 million, or $0.66 per share. The carrier had $822 million in cash on its balance sheet at the end of the third quarter. The company still has up to $665 million in additional secured federal loans, which it can collect, if necessary, between now and March.
The muscle of SkyWest is a characteristic of its business model. Company lends approximately 90% of its fleet to other airlines and use just about 10% of that by itself. The aircrafts have been provided to other carriers at fixed tariffs, ensuring a steady revenue flow. This strategy will allow SkyWest to recover more quickly after the demand for flights begins to rise again.
Overall, the management of SkyWest expects U.S. summer operation to continue to rise, leading in the fourth quarter to steady sales growth. Moreover, the decline in credit losses and depreciation deductions may offset nearly half of the decrease in payroll compensation programs’ income.
SkyWest has also recently announced that it is taking over 20 used CRJ700 regional aircraft, which American Airlines will be using from next year. In addition, 21 used CRJ700s were bought by SkyWest to be leased to United Airlines.
In the fourth quarter, SkyWest is likely to report a GAAP loss, but not especially high. Spending is just $250,000 a day on average, or around $23 million for the whole quarter. Performance in the first quarter is likely to be comparable and will change in the future.