SKYW Conference Call

[~~~^~~~]

My notes:

Weather and 5% decreased aircraft utilization due to mainline schedule changes (ex Delta pulling down flights on unpopular travel days and United maximizing stage length) hurt 4th QTR profitability. Shutting down Denver for a couple of days hurt and many SkyWest employees could not get to work.

Transferring airplanes and hiring pilots cost several million more than in previous years. The number for pilot training was 1.5 million more. Other expenses include SkyWest's employee stock purchase plan and other incentives which do not get favorable tax treatment, but increase costs.

RFP's:

• SkyWest is a "turboprop Expert" and no one knows the Dash 8 Q400 better. SkyWest looked at the CAL flying but decided the fleet size, location and strain on the current SkyWest operation did not make it a fit.
• SkyWest does not wish to offend United even though ASA could perform the Denver flying, SkyWest is very sensitive to going head to head with their customer and United "owns" Denver.
• The market knows as much as SkyWest does about Delta's RFP for the large RJ's, so there was no need to comment. (Brian Rich appeared to indicate he did not know....)

DAL is 60% of SkyWest's revenue. United is the other 40%. SkyWest has $650 million in cash, probably will have $850 to $900 by the end of 2007. Does not know what they will do with it but obviously funding growth and dividend payments are in the future. (no mention of buying other airlines, which was mentioned in past conference calls)

Growth / Fleet Changes:
Likely increase of 35 aircraft this year. Some will be "spares" two from ASA and SkyWest that will be put into the MidWest program. Mr. Rich was not specific as to which airline would operate these airplanes, but he said these were coming on line:
First Qtr -
10 CRJ 700's
6 CRJ 900's
Second Qtr -
6 MidWest CRJ200's
2 CRJ 700's
2 CRJ 900's

35 Aircraft break down:

• 15 Midwest Aircraft, 11 additional CRJ200's from the used market
• 12 DAL
• 8 900's

In the Q&A one investor asked why SkyWest pilots were looking at a union drive. The response was that ALPA has been trying to organize the pilots for 20 years and it was a great comment about SkyWest's effective management and incentive programs that ALPA had been unsuccessful.

Not much mention of ASA and no mention of ASA's negotiations.

 

[n25na]

on another note, I was reading through the February 2007 Aviation International News and came across an article that said, "SkyWest Airlines and its subsidiary, Atlantic Southeast Airlines, turned the biggest profit margins in the entire airline industry during the third quarter, 12.3 percent and 12.1 percent, respectively."

Looks like they could loosen the purse strings a lil bit.....

 

[SKYWRJGUY]

1) Operating margins and 'nets' are two separate things.
2) Nobody knows Q400s better? Neither of the SKYW owned subsidiaries owns any Dash-type plane, so where in the heck would our knowledge of the plane come from? WTF. Horizon (heck Island Air), I am sure, may have a thing to say about that--what a curious statement.
3) Dividend is current $.03 I think and raising dividends is at least a sign of management confidence, though a feller would like a little more of that cash (without buying the stock); others argue it what management does when out of other (re)investment ideas--we'll see.
4) I'll be curious to see the executive compensation details now that the SFAB requires it in full detail and easily read to the average Joe.

 

[asayankee]

Anybody else catch the fact that they have over $600 million in cash/equivilants now and expect to add another $230 million to that this year???? Then they tell us that theres simply no money!!! Yeah, right

 

[HelloNewman]

In the Q&A one investor asked why SkyWest pilots were looking at a union drive. The response was that ALPA has been trying to organize the pilots for 20 years and it was a great comment about SkyWest's effective management and incentive programs that ALPA had been unsuccessful.

Not much mention of ASA and no mention of ASA's negotiations.

Heres to 20 more years of telling ALPA to get lost! :beer: I say we have a massive goodbye ALPA BBQ/Party when the union drive fails. Don't worry even members of the OC will be invited!

 

[Gobi Gred]

Hellonewman, I hate to burst your bubble, but if this drive fails (and it probably will) it won't be the last. There has been some form of unionizing activity the whole time I've been at SkyWest. It's pretty much an ongoing thing. I'd be willing to bet a beer (or two) that after you make captain and are here for a few years that you might be singing a different tune when the next drive comes around. It would also be nice if you would at least acknowledge some of the contributions ALPA has made to the airline pilot profession. Please don't tell me you actually believe that the reason we have some the work rules we do is because management is trying to do "right" by the pilots.

 

[Texx]

Anybody else catch the fact that they have over $600 million in cash/equivilants now and expect to add another $230 million to that this year???? Then they tell us that theres simply no money!!! Yeah, right

They are in a position to purchase another airline.

My 2 cents. Watch what happens at CMR Friday. This coupled with SKYWINC agreeing to a 3 year deal at ASA. Something is up.

 

[John Pennekamp]

They cooked the books. I'm shocked they didn't post a loss just to flip the ASA pilots off since we've been touting Skywest Inc's record profits. Now they can hammer us in negotiations and say "see, we TOLD you our quarterly profit was meaningless". Then we'll be asked to subsidize their asinine decision to transfer aircraft back and forth, and the DEN blizzard shutdown.

 

[HoserASA]

They are in a position to purchase another airline.

My 2 cents. Watch what happens at CMR Friday. This coupled with SKYWINC agreeing to a 3 year deal at ASA. Something is up.

A 3 year deal Texx? As in a 3 year contract, or you referring to something else? We're not even meeting w/ the mediator for now. Whatya mean big guy?

Hoser

 

[Texx]

A 3 year deal Texx? As in a 3 year contract, or you referring to something else? We're not even meeting w/ the mediator for now. Whatya mean big guy?

Hoser

We have a TA for a 3 year duration.

 

[snozberry]

We have a TA for a 3 year duration.

WTF???????

 

[Sinca3]

I think he means an agreed to 3 yr duration of the next contract (the one we have been negotiating for going on 4.5 yrs)

 

[~~~^~~~]

Why would we agree to 3 years? Who wants to live in perpetual negotiations? Yes, I know it is supposably good for labor, but who says pay rates are going up in three years?

ALPA has destroyed scope. The Railway Labor Act prevents us from creating any internal presure. What exactly are our negotiating strengths?

There may be a real "pilot shortage" as people simply choose not to work here, but that is a lousy position to be in.

Also, with all the cash at SkyWest, why is Delta buying RJ's? Obviously Delta wants the airplanes to shop around for the best crew leasing deal. But what gives, is SkyWest an airline, or a cut rate crew leasing company?

My crystal ball is pretty foggy on the new Bombardier order. Anyone seeing through this?

 

[Texx]

Why would we agree to 3 years? Who wants to live in perpetual negotiations? Yes, I know it is supposably good for labor, but who says pay rates are going up in three years?

In SH's memo and from SPC.

Only thing I can figure out is people like Republic, and others, will have new agreements.

 

[JOPILOT]

Delta is going to fly the RJ's with their pilots.

 

[ROSWELL41]

In SH's memo and from SPC.

Only thing I can figure out is people like Republic, and others, will have new agreements.

So you think RAH is going to get contracted to fly the 30 RJ's for DAL?

 

[Brasilia Flyer]

Delta is going to fly the RJ's with their pilots.

JoPilot, you gonna be one of them?

Congrats! :beer:

 

[JOPILOT]

Not sure, thinking of applying at Home Depot...don't have to dress out of
my roller bag at the crack of ass-thirty and ride to work in the back of a
hotel van with a bunch of overly happy souls to get to work that way...
and I get to play with wood all day! Sounds pretty sweet to me!

 

[PBRstreetgang]

a cut rate crew leasing company?

Ding,ding,ding, hellonewwoman, you are now offically cutrate!
PBR
P.S. anyone know who hellonewwoman is, PM me and I will appreciate it!

 

[XPOO]

He's Jerry Seinfeld. Can't you tell by the name? Geez.

So, will we be seeing the Jenny Lee (General Lee) flying the CRJ900 here soon?

 

[Morning Wood]

They cooked the books. I'm shocked they didn't post a loss just to flip the ASA pilots off since we've been touting Skywest Inc's record profits. Now they can hammer us in negotiations and say "see, we TOLD you our quarterly profit was meaningless". Then we'll be asked to subsidize their asinine decision to transfer aircraft back and forth, and the DEN blizzard shutdown.

Cooked the books? How?

 

[John Pennekamp]

Cooked the books? How?

Glad you asked.

They did a sham aircraft transfer between ASA and Skywest, resulting in a seniority flush at ASA. This caused training and maintenance costs to spike, which contributed to the parent company's losses. Then they wrote off the losses from the cancelled flights in the DEN blizzards.

The problem is that all of these were "paper losses". No money actually changed hands.

They cooked the books by creating losses on paper to minimize the impact of their profits on ASA negotiations.

 

[TOOL CRIB]

Glad you asked.

They did a sham aircraft transfer between ASA and Skywest, resulting in a seniority flush at ASA. This caused training and maintenance costs to spike, which contributed to the parent company's losses. Then they wrote off the losses from the cancelled flights in the DEN blizzards.

The problem is that all of these were "paper losses". No money actually changed hands.

They cooked the books by creating losses on paper to minimize the impact of their profits on ASA negotiations.

HAHAHAHAHA ever heard of the word "smug"? Some people thing the world revolves around them... sheesh!

 

[John Pennekamp]

HAHAHAHAHA ever heard of the word "smug"? Some people thing the world revolves around them... sheesh!

Hello pot, it's the kettle...

 

[XPOO]

As a member of the Flat Earth Society, I reject your notion that the Earth revolves.

 

[Ben Dover]

Glad you asked.

They did a sham aircraft transfer between ASA and Skywest, resulting in a seniority flush at ASA. This caused training and maintenance costs to spike, which contributed to the parent company's losses. Then they wrote off the losses from the cancelled flights in the DEN blizzards.

The problem is that all of these were "paper losses". No money actually changed hands.

They cooked the books by creating losses on paper to minimize the impact of their profits on ASA negotiations.

So let me get this straight. Last summer they announce the transfer of aircraft, knowing full well that in December 2006 there would be a storm that shuts down Denver for two days. Wow that's impressive management. Oh ya, and the additional dollars spent on maintenance and training were paid for with monopoly money that didn't actually cost anything.

 

[homerjdispatch]

So let me get this straight. Last summer they announce the transfer of aircraft, knowing full well that in December 2006 there would be a storm that shuts down Denver for two days. Wow that's impressive management. Oh ya, and the additional dollars spent on maintenance and training were paid for with monopoly money that didn't actually cost anything.

Just more proof uncle Jerry is a pure business Genius (or john pennekamp is an idiot)!!!

 

[WalterSobchak]

Just more proof uncle Jerry is a pure business Genious (or john pennekamp is an idiot)!!!

And proof that you are not a Genious.

 

[Ben Dover]

Just more proof uncle Jerry is a pure business Genius ...

I have to agree with you there. Jerry and his team deserve a Nobel Prize for their "fuel reimbursement" scheme. Show me another airline that actually makes MORE money when the price of fuel goes UP.

 

[HelloNewman]

Ding,ding,ding, hellonewwoman, you are now offically cutrate!
PBR
P.S. anyone know who hellonewwoman is, PM me and I will appreciate it!

Don't worry you don't have to go to all that trouble. You will also be invited to the goodbye ALPA BBQ, and can meet me in person there. Unlike the ALPA people I don't just like people who think like me, I like everyone. Cya at the BBQ in ORD when the union drive goes down in flames. The only prerequisite is that you get yourself to ORD if not based there. Cya around.