SkyWest Undergoes Restructuring

6th Jan 2015

The regional carrier went through rough and turbulent skies as it cruised its way through 2014.

The airline blamed the below-market contracts that it inherited from another regional carrier, ExpressJet, which it acquired in 2010. The massive pilot training, as well as rest rules added financial burden to the airline. The unusual weather pattern across North America that spawned severe winter adversely affected their operations.

During the first half of fiscal year 2014, SkyWest registered a pre-tax loss of $48 million. The loss was in stark contrast to a pre-tax profit of $39 million it made during the same period in 2013.

The carrier's stock nosedived to $7 in October 2014 from $15 during the beginning of last year.

The start of 2015 has seen the airline starting its restructuring program to return to profitability. Part of this is the disposal of smaller aircraft from its fleet, which they deem as inefficient to maintain, while keeping some of its fleet of modern and fuel-efficient jetliners or regional aircraft whose seat capacity is 50 or more.

According to SkyWest Airlines, the larger regional jets proved to be more profitable than smaller planes.

The airline has resolved to get rid of some of its turboprops and small regional aircraft as soon as possible to get profit margins that the company badly needs to sustain its operations and stay economically viable.

From a fleet of 751 as of end of September last year, the airline wanted to reduce it to 715 towards the end of this year by retiring several smaller unprofitable aircraft such as the 30-seat turboprops. It specifically mentioned that its fleet of 76-seat jets is its main workhorse, as they prove to be more profitable to operate.

SkyWest is also planning to shorten by three years the money-losing contract that ExpressJet had entered into with United to 2017, instead of 2020. ExpressJet had an existing contract with United when SkyWest acquired the former.

To further reduce its losses, the airline starts to terminate routes that are found to be not lucrative enough to operate, while dropping some flights on certain routes across its network.

It is projected that by 2018, SkyWest will be a much smaller airline but more profitable.