SkyWest has reported net income of $34 million, or $0.66 per diluted share for the third quarter of 2020, compared to net income of $91 million, or $1.79 per diluted share, for Q3 2019. The primary factor in SkyWest’s lower results in Q3 2020 compared to Q3 2019 was reduced flight schedules and lower demand resulting from the COVID-19 pandemic.
Commenting on the results, Chip Childs, Chief Executive Officer of SkyWest, said, “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… 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 revenue was $457 million in Q3 2020, down from $760 million in Q3 2019, due to the COVID- 19 pandemic that caused a significant reduction in the number of scheduled flights SkyWest operated under its flying contracts compared to the same period last year. Total block hours in Q3 2020 were down 41% from Q3 2019.
SkyWest deferred recognising revenue on $30 million of fixed monthly payments received during Q3 2020, down from $69 million of revenue that was deferred in Q2 2020. SkyWest will recognise the deferred revenue based on completed flights over the remaining contract term.
Operating expenses were $383 million in Q3 2020, down from $614 million in Q3 2019 due to fewer flights operated compared to the same period last year, with $190 million in CARES Act payroll support recognised as an offset to salaries and wages expense in Q3 2020. SkyWest anticipates recognizing the remaining $3 million in payroll support grants in Q4 2020.
SkyWest has secured an agreement to place 20 used CRJ700s under a multi-year flying contract with American Airlines. SkyWest anticipates using its own aircraft not currently under contract with a partner to fulfil this agreement. The aircraft are expected to be placed into service throughout 2021. Following the placement of these 20 aircraft, combined with anticipated placement of four CRJ700s in Q4 2020 and five CRJ700s in 2021 under a previously announced deal, SkyWest is scheduled to have a total of 90 CRJ700s under contract with American by the end of 2021.
SkyWest also secured agreements to acquire 21 used CRJ700s in a 50-seat configuration and lease the aircraft under a multi-year term to another regional airline operating for United Airlines. The aircraft purchases and leases are expected to be completed in Q4 2020.
SkyWest states that it is coordinating with its major airline partners to optimise the timing of upcoming fleet deliveries under previously announced deals in response to COVID-19 schedule reductions.
SkyWest had $822 million in cash and marketable securities at September 30, 2020, up from $762 million at June 30, 2020. Total debt at September 30, 2020 was $3.1 billion, up from $3.0 billion at June 30, 2020. Capital expenditures during Q3 2020 was $10 million for a spare engine and other maintenance assets.
As of September 30, 2020, SkyWest had a $75 million line of credit facility. SkyWest had approximately $35 million of letters of credit issued under the facility and $40 million available under the line at quarter-end.