SkyWest warns of lower 1Q09 results
SkyWest, Inc. says it expects its financial results for the quarter ended 31 March 2009 to be lower than it previously anticipated.
Consolidated net income is estimated to be between $4.5 million and $7.5 million, with earnings per diluted share estimated to be between $0.08 and $0.13. SkyWest cautioned, however, that these estimates are preliminary and are subject to modification or revision in the course of completing SkyWest's quarterly financial review procedures.
The company cites four primary factors contributing to the determination of its estimated results. First, SkyWest's wholly-owned subsidiary, Atlantic Southeast Airlines (ASA) experienced significant weather related cancellations in its Atlanta hub during the quarter ended 31 March 2009. Additionally, on 31 March 2009, 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. ASA cancelled approximately 750 flights more than normal as a result of the severe weather and aircraft grounding during the quarter. As a result, ASA experienced a negative impact on revenues currently estimated to be approximately $7.6 million pretax.
Second, SkyWest has evaluated certain of its marketable security investments for impairment of value in accordance with Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and has determined that certain securities have experienced a decline in value that is deemed to be other-than-temporary. As a result, SkyWest currently anticipates that it will record a charge of approximately $7.0 million pretax related to the impairment during the quarter ended 31 March 2009.
Third, 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 has expended an additional $11.5 million pretax for these types of expenses during 1Q09.
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 rate estimate as the basis for estimating Delta contract revenues during the quarter. The
use of the preliminary rate estimates results in a negative impact to revenue of approximately $5.0 million pretax.
SkyWest currently intends to issue its financial results for the quarter ended 31 March 2009, on Wednesday 6 May 2009. SkyWest cautions that the anticipated financial and operating results discussed in this release are preliminary and that SkyWest's actual financial and operating results may vary from these estimates.