ExpressJet faced challenging Q1

Washington DC
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Regional carrier ExpressJet faced a challenging first quarter, with weather delays contributing to unexpected losses in the operation.

Severe weather events at ExpressJet and sister operator SkyWest Airlines resulted in about 1,900 cancellations of flights and 4,500 block hours during the quarter. This contributed to a pretax impact of about $4.5 million.

The effects were felt disproportionately by Atlanta-based ExpressJet, which operates many of its flights on the east coast.

"A lot of that winter activity was at locations where our ExpressJet operation is very heavily concentrated," says SkyWest Inc. president Bradford Rich on an 8 May earnings call.

Increased maintenance expenses at the ExpressJet segment also contributed to a disappointing quarter, some of which were tied to the weather events. Sister SkyWest Airlines, in comparison, delivered a strong quarter.

Rich declines to break out specific earnings for the ExpressJet operations until the carrier releases quarterly regulatory filings on 10 May. But he says that the impacts of maintenance and weather turned what it projected as a modest loss into a "fairly material loss" at the segment.

"It was just a pretty material impact in the quarter," he says.

Executives say that the carrier is still working on some fundamental issues that were inherited from the legacy ExpressJet carrier when SkyWest's subsidiary Atlantic Southeast Airlines purchased it in 2010. One issue is the ratio of spare aircraft that the carrier has in its fleet, which the carrier is working to optimise. This change could help improve operating performance, he says.

"Typically we like to have a ratio of 1:20 for spare aircraft," says SkyWest Inc. chief financial officer Mike Kraupp. "We have determined that how aircraft were allocated in our ExpressJet operation is challenging, i.e. not enough spare aircraft, and we believe that in having a spare ratio more in line with what I have outlined would improve reliability in that operation," he says.

Combined results for ExpressJet and SkyWest show operating income down in the first quarter to $15.6 million, compared to $20.5 million in the same three months of 2012. Maintenance expenses for both carriers were down to $167 million in the quarter from about $180 million in the first quarter of 2012.