SkyWest, Inc, parent of SkyWest Airlines and Atlantic Southeast Airlines, has reported net income of $9.4 million for the quarter ended 31 March 2009, compared to $29.1 million of net income for the same period last year. This was based on reported operating revenues of $672.6 million for the quarter, compared to $868.0 million for the same period last year.
Total operating revenues for the first quarter of 2009 decreased for several principal reasons, says SkyWest.
First, SkyWest experienced a reduction in cost reimbursements of approximately $164.5 million, inclusive of decreased fuel costs of $147.0 million, paid by its major partners. For financial reporting purposes, these reimbursements are recorded as operating revenues under SkyWest's contract flying arrangements.
Second, SkyWest's operating revenues were reduced by approximately $18.3 million due to reductions in the flight schedules made by the company's major partners.
Third, ASA experienced significant weather-related cancellations at its Atlanta hub during the first quarter. Additionally, on 31 March, as a result of an internal audit, ASA grounded 60 CRJ200s in order to perform engine safety inspections in accordance with the manufacturer's recommendations. As a result, ASA experienced a reduction in operating revenues of $7.6 million.
Fourth, both ASA and SkyWest Airlines have been involved in rate negotiations with Delta Air Lines as required by the respective Delta Connection Agreements. As a result of the ongoing negotiations with Delta, SkyWest has primarily used Delta's preliminary estimate as the basis for estimating contract revenues during the quarter ended 31 March 2009. The use of the preliminary rate estimates resulted in a reduction to operating revenues of $5.0 million for 1Q09. Overall, during this quarter, SkyWest experienced a reduction in block hours of 8.2%, compared with the same quarter of 2008.
Total operating expense and interest per available seat mile (ASM) for 1Q09, excluding fuel expense of $140.6 million or $0.027 per ASM, increased by approximately 4.1% to $0.101 from $0.097 for the comparable quarter of 2008. The increase was due primarily to the reduction in SkyWest's block hours, as scheduled by SkyWest's major partners, resulting in an 8.0% reduction in ASM production, while at the same time SkyWest did not experience a corresponding reduction in total operating expenses and interest.
SkyWest's operating subsidiaries (ASA and SkyWest Airlines) continue to incur significant non-engine maintenance costs and excess crew expenses resulting from reduced block hour schedules as provided by its major partners. As a result, SkyWest expended an additional $11.5 million for these types of expenses during 1Q09. Total operating expense and interest, excluding fuel expense, was $514.1 million for the quarter, compared to $537.7 million for 1Q08. Additionally, the increase in cost per ASM is also the result of SkyWest incurring higher non-engine related direct maintenance costs that are primarily due to the general aging of its fleet.
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