Could someone smart explain SKYW stock's continual decline?

[JustaNumber]

You certainly get the prize for knowing what you are talking about if all those acronyms and figures really mean something.

Just kidding. Thank you very much for an analyst's view.

He's basically saying the company isn't worth as much as it's trading for because earnings are down in the last 12 months, and are expected to go lower, and our numbers are worse than industry peers. Of course it is worth noting that the financial industry considers our industry peers (the "Regional Airline Industry") to consist of:

Alaska Air Group
Allegiant Travel Company
Copa
GOL Linhas Areas Inteligentes
Hawaiian
JetBlue Airways Corporation
Lan Airlines
Pinnacle Airlines
Republic Airways
Ryanair
SkyWest
Southwest Airlines

Note that only two of those are what we consider to be our TRUE peers, and one of those is in bankruptcy so obviously isn't doing so well. We're therefore not doing as poorly as it may appear, compared to our real peers.

SnowBoardBum also noted that there is a good bit of risk and uncertainty in the regional industry right now (which cannot be denied), but that there is also the potential for a huge upside if a newly pioneered codeshare agreement can be made to work. It's not worth the investment risk to him, but to us who can't easily change our career investments with a simple mouse-click, it's not all doom and gloom.

I would be interested to know if SnowBoardBum is getting his information about "SKYW pioneering a possibly new model of code sharing with at risk flying" from these rumor boards, or from more substantial industry information.

 

[Kaman]

SKYWEST or RAH are neck and neck for the next Ch. 11 filing...Whether SKY has a war chest of $$$, it's going to happen...count on it...Unless, they figure out a way to get your payroll down by people migrating to the legacy carriers, it is inevitable for all codeshares to go to court and get these concessions. The legacy carriers WILL NOT renegotiate more favorable terms on their contract flying unless it benefits them.
At-risk flying is the only other way that a regional airline has to generate revenue, but historically this has not been successful if one were to look at ExpressJet and Independence Air as examples. Great ideas, and were popular with the flying public, but way too costly for the revenue generated.

 

[SnowBoardBum]

JustaNumber:
You’re absolutely right about the industry peer comment. It is a rather wide universe used to describe peer. Just for insight if you’re interested, for trading multiples and operating stats the universe consisted of:

· Alaska Air Group, Inc.
· Allegiant Travel Co.
· GOL Linhas
· Hawaiian Holdings Inc.
· Jet Blue Airways Corp.
· Republic Airways Holdings Inc.
· Southwest Airlines Co.
· Spirit Airlines, Inc.
· United Continental Holdings, Inc.
· US Airways Group, Inc.

You were pretty much right on.

In regard to the new business model – It’s been known for a number of years now that the fee-for-departure model was on the way out. The major partners were not going to continue to assume commodity price risk while the regional’s were shielded from this and continued to reap substantial profits at the expense of the major carrier. There would have to be some serious cost sharing going forward. A new business model had to be created.

SKYW management has been quite vocal for a number of years about pioneering a new business model, one based around code sharing. This model would allow the regional partner access to infrastructure already in place at the majors to put bodies in the seats. This would not be a go at it alone scenario like Indy Air or the branded Express Jet flying. This model would have the support (not direct financial) of the major partners.

SKYW has been playing with the cost structure on a number of routes that are currently flown at risk for both United and Delta for some time now. This type of flying would require substantial consolidation in the industry. Bringing scale to the operation that would be needed to make this type of operation feasible.

JustaNumber my information does not come from this rumor mill.

 

[amcnd]

SKYWEST or RAH are neck and neck for the next Ch. 11 filing...Whether SKY has a war chest of $$$, it's going to happen...count on it...Unless, they figure out a way to get your payroll down by people migrating to the legacy carriers, it is inevitable for all codeshares to go to court and get these concessions. The legacy carriers WILL NOT renegotiate more favorable terms on their contract flying unless it benefits them.
At-risk flying is the only other way that a regional airline has to generate revenue, but historically this has not been successful if one were to look at ExpressJet and Independence Air as examples. Great ideas, and were popular with the flying public, but way too costly for the revenue generated.

SkyWest's "at risk" flying is allot different then Indi/XJT's were...

 

[JustaNumber]

SKYW management has been quite vocal for a number of years about pioneering a new business model, one based around code sharing. This model would allow the regional partner access to infrastructure already in place at the majors to put bodies in the seats. This would not be a go at it alone scenario like Indy Air or the branded Express Jet flying. This model would have the support (not direct financial) of the major partners.

SKYW has been playing with the cost structure on a number of routes that are currently flown at risk for both United and Delta for some time now. This type of flying would require substantial consolidation in the industry. Bringing scale to the operation that would be needed to make this type of operation feasible.

JustaNumber my information does not come from this rumor mill.

SnowBoardBum,
Thank you for the expanded reply. I have some questions, if you have any further knowledge:

This new code-share model seems to be prohibited by previous mainline pilot scope agreements; there was great speculation that such changes would be evident in the new TA, but it appears not to be. Does that mean the code-share model is dead for the next 3 1/2 years?

When you say that bringing scale to the operation would be necessary, are you talking purely seat-miles, which could be fairly easily accomplished with additional regional mergers, or are you talking equipment gauge, which is a whole different ballgame?

I would be very interested to know more about your sources.

 

[SnowBoardBum]

JustaNumber:

Unfortunately I don’t have the new Delta TA to read. I would suspect that there is not language in there limiting code sharing agreements, but I very well could be wrong. If there is language limiting such agreements the new model isn’t necessarily dead it may have to be modified into some form of hybrid model.

The other thread on the Delta CPA has too much crap to wade through to garner anything worthwhile. That being said this may have already come up – It sounds like a reduction in 200’s for DCI and more A/C for mainline is a big part of this TA. I would need to review the Delta CPA with SKYW again as reducing block hours could be costly for Delta. There is also the United side where I really think this would have the greatest impact and likelihood of being implemented in the near-term.

Scale not in ASM. As you noted that is rather easy with an acquisition. Scale more along the lines of operational scale and cutting the fat post transaction. In terms of larger A/C yes that would be a step in the right direction.

FYI – I have no skin in this game.

Sources huh – that should be a private conversation.

 

[boknowsASA]

.....

 

[777forever]

JustaNumber:

Unfortunately I don’t have the new Delta TA to read. I would suspect that there is not language in there limiting code sharing agreements,

Yes you very well are wrong


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[JustaNumber]

Thank you again for your insight, SnowBoardBum. Definitely food for thought.

 

[BrickTop]

I love it when Pilots think they know how to run an airline.