SkyWest Profit Falls as Costs Outpace Revenue Growth
Operating margin narrowed to 14.1% as expenses grew faster than revenue.
SkyWest, Inc. (SKYW), the regional airline operator, posted lower second-quarter earnings as rising fuel costs and other expenses outweighed increased flying activity. Operating expenses rose 9% to $946.9 million, pushing operating income down 8% to $155.8 million.
Revenue growth held at 7% for a second consecutive quarter, extending a slowdown from 8% in the fourth quarter of 2024, 15% in the third quarter and 19% in the year-earlier period. The deceleration persisted even as block-hour growth reaccelerated to 5.4% from 3% in the first quarter.
Second-quarter revenue rose to $1.103 billion, while net income fell 16% to $100.7 million and diluted earnings declined to $2.54 a share from $2.91 a share. Compared with the first quarter, pre-tax income increased 29% as block hours and revenue each rose about 9%. Net income remained roughly flat because the first quarter included a $12 million discrete tax benefit.
Higher production did not produce passenger growth. Departures increased 2.3% from a year earlier, while passengers carried declined 1.3% and load factor fell 2.2 percentage points to 80.6%.
The production mix shifted toward larger regional jets. Block hours flown by CRJ550s increased 72.7%, and CRJ900 hours rose 35.7%, while CRJ700 and E170 hours declined 11.9%. E175 hours grew 4.7%. Aircraft fuel expense more than doubled to $60.6 million from $27.5 million, with higher prorate fuel cost per gallon acting as a drag on earnings.
SkyWest secured 11 E175 aircraft for American Airlines to replace 11 CRJ700s, raising anticipated E175 deliveries to 13 in 2026 and 17 in 2027. The agreement reduced the number of unassigned future aircraft to 33 from 44. The company now expects its E175 fleet to reach 300 aircraft by the end of 2027, pulling the milestone forward by about a year.
The board approved a $250 million increase to the share-repurchase program after SkyWest spent $75 million buying back 833,000 shares during the quarter. Capital expenditures rose to $139 million, while debt declined to $2.3 billion and cash and marketable securities fell to $601 million, reflecting continued fleet investment alongside the expanded capital-return program.