SkyWest(US:SKYW)2021-10-29 04:21Financial Data and Key Metrics Changes - The company reported Q3 2021 GAAP net income of $10 million, or $0.19 diluted earnings per share, with adjusted net income of $74 million, or $1.45 diluted earnings per share [16][17] - Total Q3 revenue was $745 million, up 63% from Q3 2020 and up 13% from the previous quarter, only down 2% from Q3 2019 [18] - Q3 pretax income was $14 million on a GAAP basis and $99 million on an adjusted basis [16][17] Business Line Data and Key Metrics Changes - Contract revenue increased by 54% year-over-year and 12% sequentially, while prorate revenue was $128 million, up 111% year-over-year and 24% from the previous quarter [18][19] - Leasing and other revenue rose by 107% year-over-year and 7% sequentially [19] Market Data and Key Metrics Changes - The company achieved a 99.8% adjusted completion rate for Q3, with nearly 73,000 more scheduled flights compared to the same quarter last year [10] - The company anticipates a decrease in block hours by approximately 5% in Q4 compared to Q3 2021, with expectations for 2022 to be slightly higher than 2019 levels [29] Company Strategy and Development Direction - The company is focused on fleet transition, taking delivery of six new E175s and securing agreements for 16 additional E175s with Delta and nine with Alaska [8][26] - The company aims to maintain flexibility in its prorate model to allocate resources toward the best economic opportunities [9][30] Management's Comments on Operating Environment and Future Outlook - Management noted that 2022 is expected to be a transition year, with strong demand for products and a focus on preserving liquidity while executing recovery strategies [14][23] - The company does not expect additional grant income in Q4 and anticipates some softening in production schedules [23] Other Important Information - The company ended Q3 with cash of $913 million and total debt of $3 billion, down from $3.2 billion at year-end 2020 [21][22] - The company experienced an IT server disruption that affected operations, with potential costs estimated between $15 million to $20 million in Q4 [11][24] Q&A Session Summary Question: What are the current attrition levels among pilots? - Management indicated that attrition has increased to double digits but hiring and training are outpacing attrition rates [38][56] Question: How is the prorate segment being managed? - The prorate model has flexibility, allowing for reallocation of pilots and aircraft to contract models as business demand fluctuates [40][41] Question: What lessons were learned from the recent IT disruption? - Management clarified that the server outage was not directly caused by malware but was part of system repairs, emphasizing the need for improved processes to prevent future occurrences [47][50] Question: How is the company addressing supply chain issues in maintenance? - The company is navigating supply chain challenges by conducting some inspections internally and working closely with third-party providers [69] Question: What is the outlook for the 50-seater fleet in light of higher fuel prices? - Demand for the 50-seater fleet remains strong, but higher fuel prices may pose challenges, with flexibility to reallocate block hours as needed [62]