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SKYWEST INC (SKYW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong operational and financial performance: revenue $944.4M and diluted EPS $2.34, with operating income of $144.1M; YoY revenue growth was driven by higher block hours and lower deferred revenue, and sequential gains reflected continued fleet utilization progress .
  • Management raised 2025 outlook: block hours growth increased to ~12% (from ~10%), 2025 GAAP EPS color lifted to “around $9,” and CapEx increased to ~$600M; maintenance expense remains elevated at ~$200M per quarter as aircraft are reactivated .
  • Strategic wins: multi-year extension with American to operate a total of 74 CRJ700s, continued CRJ550 deployment with United and Delta, and ongoing E175 deliveries positioning SkyWest as the largest Embraer 175 operator by 2026 .
  • Balance sheet strength supports growth and capital allocation: cash $802M, total debt $2.7B, and $48M remaining under buyback; Q4 also included $5M below-the-line gains and $20M recognition of previously deferred revenue impacting comparability versus prior periods .
  • Catalysts: American contract extension, accelerated CRJ550 roll-out, higher 2025 EPS color and block hour outlook, and re-engagement on commuter authority for SkyWest Charter to restore service in underserved markets .

What Went Well and What Went Wrong

  • What Went Well

    • Contract momentum and fleet positioning: extension with American to 74 CRJ700s; CRJ550 expansion across United and Delta; E175 deliveries on track toward 278 by 2026 .
    • Continued operational improvement: ~99.9% adjusted flight completion and sequential block hour growth; dual-class aircraft produced 87% of block hours in Q4 .
    • Raised 2025 outlook: block hours +12% YoY, GAAP EPS color “around $9,” and strong liquidity to fund growth; quote: “We expect our 2025 GAAP EPS could be in the $9 per share area” .

  • What Went Wrong

    • Elevated maintenance costs and MRO constraints: management reiterated ~$200M per quarter in 2025 with labor/parts challenges; timing front-loads expense before aircraft return to service .
    • Deferred revenue and below-the-line items complicate comparability: Q4 recognized $20M of previously deferred revenue and booked $5M other income from asset sales/mark-to-market, affecting GAAP optics .
    • Utilization still below 2019: management cited utilization levels “slightly down” vs. 2019, with upside dependent on fleet availability and MRO throughput .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$867.1 $912.8 $944.4
Net Income ($USD Millions)$75.6 $89.7 $97.4
Diluted EPS ($USD)$1.82 $2.16 $2.34
Operating Income ($USD Millions)$119.6 $131.4 $144.1
Operating Margin (%)13.8% 14.4% 15.3%
Net Income Margin (%)8.7% 9.8% 10.3%
Effective Tax Rate (%)26.0% 23.0% 27.1%
Weighted Avg Diluted Shares (M)41.43 41.56 41.70

Notes:

  • Q4 YoY revenue rose 26% ($944.4M vs. $751.8M), aided by higher block hours and recognizing $20M previously deferred revenue, versus $63M deferred in Q4 2023 .
  • Sequential revenue increased ~3% ($944.4M vs. $912.8M), reflecting improved utilization .

Segment revenue breakdown

MetricQ2 2024Q3 2024Q4 2024
Flying agreements ($USD Millions)$838.2 $883.5 $912.8
Prorate & Charter ($USD Millions)$107.0 $123.0 $126.0
Lease, airport services & other ($USD Millions)$28.9 $29.3 $31.6

KPIs

KPIQ2 2024Q3 2024Q4 2024
Total Block Hours317,462 334,459 350,318
Departures189,325 201,397 206,588
Passengers Carried10,691,017 11,263,322 11,231,510
Adjusted Flight Completion (%)99.9% 99.9% 99.9%
Passenger Load Factor (%)84.4% 83.7% 82.2%

Other items impacting Q4 comparability:

  • Deferred revenue recognition: +$20M recognized in Q4 2024; cumulative deferred revenue $322M at year-end .
  • Other income: ~$$5M from asset sales and mark-to-market gains; cash $802M; total debt $2.7B; buybacks of 47K shares in Q4, $48M authorization remaining .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Block hours growth YoYFY2025~10% (Q3 call) ~12% (Q4 call) Raised
GAAP EPS colorFY2025Mid-$8 area (Q3) “Around $9” (Q4) Raised
CapExFY2025“~$500M” (Q3) “~$600M” (Q4) Raised
Maintenance expense run-rateFY2025~$200M per quarter (Q3) ~$200M per quarter (Q4) Maintained
Depreciation expenseFY2025N/AFlat to slightly down vs 2024 (extended CRJ700 useful lives; CRJ550 placements) New
CRJ550 deployment2025–2026United total 40; Delta transition 15 by Q1’25 (Q3) Operate 30 by end of 2025; last 10 in 2026 (United); continued Delta transitions Schedule refined
American CRJ700 contractMulti-yearN/AExtension to total 74 CRJ700s through most of the decade New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Pilot staffingExpect >5,000 pilots by YE; improving captain availability Pipeline robust; attrition “extremely low”; hiring pace below prior expectations Stabilizing, supportive of growth
Fleet utilizationE175 near full utilization by YE; CRJ near full by mid-2025 Utilization “slightly down” vs 2019; upside via MRO throughput and availability Improving, still below 2019
CRJ550 expansionFirst Delta CRJ550; United deal for 40 Operate 30 by YE 2025; final 10 in 2026; American CRJ700 extended to 74 Expanding
Maintenance/MRO$200M/qtr run-rate in 2025; labor/parts constraints $200M/qtr reiterated; expenses precede service resumption Elevated through 2025
Prorate & Charter (SWC)Strong demand; 16 aircraft; growing fall/winter bookings 18 SWC aircraft; strong demand; re-engaging for commuter authority Growing; regulatory engagement
Regulatory/EASUnderserved market recovery opportunity DOT Secretary reiterated commitment to EAS; company monitoring policy risk Supportive environment with watchpoints

Management Commentary

  • Strategy and execution: “We expect block hour production to be up about 12% this year compared to 2024… placing 16 new E175s into service in 2025 and ’26” .
  • EPS outlook and depreciation: “We expect our 2025 GAAP EPS could be in the $9 per share area… depreciation expense will be flat to slightly down” .
  • American extension and CRJ550 roll-out: “Operate a total of 74 CRJ700s with American… operate 30 CRJ550s by the end of this year, last 10 in 2026” .
  • Operational credibility: “Completed nearly 30,000 more flights than the same quarter last year, delivering 99.9% adjusted completion” .
  • Balance sheet and liquidity: “Generated over $500M in free cash flow in 2024… unpledged collateral of over $1.5B… $48M remaining under authorization” .

Q&A Highlights

  • Prorate/service restoration timing: Near-term additions in Q1–Q2 with larger prorate expansion in Q3–Q4; summer prorate demand very strong .
  • Commuter authority: Company “reengaging” on SkyWest Charter commuter authority with optimism despite recent events; views it as strategically important .
  • American contract economics: Extension to end of decade; economics “very similar” to current terms .
  • EAS policy risk: Management monitoring changes; cites strong political support and economic benefits to small communities per DOT leadership comments .
  • Upside drivers to +12% block hours: Further fleet utilization gains and improved fleet availability as MRO constraints ease .
  • CRJ200 asset monetization: Mix of airframe sales and engine leases (e.g., via Contour), with strong demand for well-maintained assets .
  • Mix of 2025 block hour growth: “Vast majority” from contract flying; increased utilization and reactivation of parked aircraft under long-term agreements .

Estimates Context

  • S&P Global consensus estimates were unavailable at the time of analysis due to request limits, so a formal beat/miss assessment versus Wall Street consensus for Q4 2024 cannot be provided (S&P Global data unavailable).
  • Implications for estimates models: Management’s raised 2025 block hour outlook (12% vs. 10%), higher GAAP EPS color ($9), and increased CapEx ($600M) suggest upward adjustments to FY2025 EPS and production, with depreciation slightly lower and maintenance expense timing front-loaded at ~$200M/qtr .

Key Takeaways for Investors

  • Raised 2025 outlook and EPS color: Block hours +12% and GAAP EPS “around $9” indicate stronger earnings trajectory than prior quarter’s mid-$8 framework .
  • Contract extensions and fleet actions reduce execution risk: American CRJ700 extension to 74, CRJ550 deployments, and 16 new E175s scheduled reinforce multi-year visibility .
  • Maintenance spend peaking as growth enabler: ~$200M/qtr in 2025 reflects reactivation costs ahead of revenue; expect operating leverage as aircraft return to service .
  • Deferred revenue optics: Q4 included $20M recognition of previously deferred revenue (vs. $63M deferred in Q4’23), aiding reported revenue; investors should normalize for contract accounting when modeling .
  • Liquidity and deleveraging underpin optionality: $802M cash, $2.7B debt, and $48M remaining buyback capacity support continued growth investments and opportunistic capital returns .
  • Underserved market strategy is intact: Strong prorate demand and charter growth, with renewed push for commuter authority, position SkyWest to capture regional service restoration .
  • Near-term trading lens: Watch for announcements on additional aircraft assignments, MRO throughput improvements, and further clarity on commuter authority—all potential catalysts for sentiment and multiple .