SkyWest turns to loss in Q2 as performance declines

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US regional carrier SkyWest Inc reports a $14.7 million net loss in the second quarter, as it failed to achieve expected performance incentives and saw higher than expected costs.

Operating revenue decreased 2.7% to $816.6 million and operating expenses increased 1.9% to $803.3 million during the quarter. Operating profit was down more than three-fold to $13.2 million.

Lower than expected performance incentives from its mainline contract carriers Alaska Airlines, American Airlines, Delta Air Lines and United Airlines, a $20.6 million increase in pilot training and FAR117 compliance costs, a $6.8 million write-down of certain ExpressJet Airlines assets and a reversal of the tax benefit in the first quarter negatively impacted revenues.

“Although we recovered somewhat from the severe weather and related impact we suffered during the first quarter of 2014, we faced additional issues in the second quarter of 2014 and our financial and operating results simply did not meet our expectations during the quarter,” says Jerry Atkin, chairman and chief executive of St. George, Utah-based SkyWest, in a statement. “However, non-operating items accounted for about 50% of the lower results at ExpressJet Airlines while SkyWest Airlines financial performance was slightly better than plan.”

Traffic fell 1.3% and capacity 3.3% in the second quarter.

SkyWest add eight Embraer 175s and removed eight 50-seat regional jets from its fleet during the period.

The airline anticipates unprofitable contracts on 56 Embraer ERJ145s at its ExpressJet division to naturally expire in the second half of 2014 and another 101 to expire in 2015. These contracts date to Continental Airlines prior to its 2010 merger with United.

United chief executive Jeff Smisek has said that they plan to remove roughly 130 50-seat regional jets from its fleet by the end of 2015.