SkyWest, Inc. (SKYW) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reflect a positive sentiment with strong financial performance, strategic partnerships, and optimistic future guidance. The company is expanding its fleet, improving aircraft utilization, and maintaining a strong balance sheet. Although Q1 earnings are expected to be flat, the overall outlook with increased block hours and EPS growth is favorable. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8%.
Key Financial Performance
Net Income (Q4 2025) $91 million or $2.21 per diluted share, compared to the previous year. The reasons for the change include challenges in the fourth quarter, such as the government shutdown and mandatory flight reductions, as well as improved production in 2025.
Net Income (Full Year 2025) $428 million or $10.35 per diluted share, reflecting a 31% increase in pretax income year-over-year due to a 15% growth in production and strong operating leverage.
Total Revenue (Q4 2025) $1 billion, up 8% from $944 million in Q4 2024. The increase was driven by higher contract revenue, prorate and charter revenue, and leasing and other revenue.
Contract Revenue (Q4 2025) $803 million, up from $786 million in Q4 2024. The increase was attributed to ongoing flying agreements and fleet utilization.
Prorate and Charter Revenue (Q4 2025) $167 million, up from $126 million in Q4 2024. The increase was driven by strong prorate demand.
Leasing and Other Revenue (Q4 2025) $54 million, up from $32 million in Q4 2024. The increase was driven by discrete maintenance services provided to third parties.
Pretax Income (Full Year 2025) $566 million, up 31% from 2024, reflecting strong operating leverage and a 15% increase in block hours.
EBITDA (Full Year 2025) $982 million, up over $100 million from 2024, driven by improved operational performance and revenue growth.
Free Cash Flow (Full Year 2025) Over $400 million, providing liquidity for investments in CRJ fleet initiatives and other capital deployment opportunities.
Debt Repayment (Full Year 2025) $492 million, part of a 10% reduction in debt balance since the end of 2024, including financing for 7 new E175s.
Ending Debt (Q4 2025) $2.4 billion, down from $2.7 billion as of 12/31/2024, reflecting debt repayment and fleet investments.
Ending Cash Balance (Q4 2025) $707 million, down from $802 million at Q4 2024, due to debt repayment, CapEx, and share repurchases.
Capital Expenditures (Full Year 2025) Approximately $580 million, including the purchase of 7 new E175s and investments in CRJ900 airframes and engines.
Share Repurchases (Full Year 2025) $85 million, doubling the investment from 2024, with nearly 850,000 shares bought back.
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Operating Highlights
E175 fleet expansion: SkyWest plans to have nearly 300 E175s by the end of 2028, with 9 new E175s expected in 2026 and 16 more for Delta in 2027 and 2028.
CRJ550 expansion: SkyWest has a multiyear agreement with United for 50 CRJ550s, with 27 already in service and 23 more expected to enter service in 2026.
Prorate business growth: SkyWest is expanding its prorate agreements, including a new agreement with American Airlines for up to 9 aircraft by mid-2026. Demand for prorate services remains strong, with plans to return service to several communities.
Fleet flexibility: SkyWest is leveraging its parked dual-class CRJ aircraft and CRJ200s to enhance service flexibility and meet market demand.
Operational efficiency: Achieved over 250 days of 100% controllable completion in 2025, with over 2,500 daily scheduled departures.
Debt reduction: Reduced debt by $1 billion over the past three years, ending 2025 with $2.4 billion in debt, down from $2.7 billion in 2024.
Contract extensions: Extended flying agreements for 40 E175s with United and 13 E175s with Delta, ensuring no major contract expirations until late 2028.
Long-term fleet strategy: Secured delivery slots for 69 E175s from 2027 to 2032, with flexibility to defer or terminate orders if necessary.
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Risk or Challenges
Government Shutdown and Mandatory Flight Reductions: The fourth quarter was unusually challenging due to the government shutdown and mandatory flight reductions, leading to more canceled flights than major partners and a modest financial impact.
Third-Party MRO Network Challenges: Ongoing challenges in the third-party MRO network, including labor and parts shortages, are impacting maintenance operations and increasing expenses.
Seasonal Revenue Fluctuations: Revenue seasonality has returned, with utilization improving during summer months but creating variability in financial performance.
Fleet Utilization and Maintenance Costs: Bringing parked aircraft back into service requires significant maintenance expenses before they can be operational, impacting short-term financials.
Dependence on Major Partners: The company’s operations are heavily reliant on agreements with major partners like United, Delta, and American, which could pose risks if these partnerships are disrupted.
Economic and Market Uncertainties: General economic conditions and market demand fluctuations could impact the company’s ability to meet growth and financial targets.
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Guidance & Outlook
Revenue Growth: For 2026, SkyWest expects mid-single-digit percentage growth in block hours over 2025, indicating a moderate increase in operational activity.
Earnings Per Share (EPS): SkyWest anticipates EPS for 2026 to be in the mid-$11 range, slightly higher than previous expectations. Quarterly seasonality is expected, with Q1 2026 EPS flat to down from Q4 2025, and Q2 and Q3 being the strongest quarters.
Capital Expenditures (CapEx): SkyWest projects total CapEx for 2026 to be approximately $600 million to $625 million, consistent with 2025 levels, with investments in 9 new E175 aircraft and other fleet initiatives.
Fleet Expansion: SkyWest plans to take delivery of 9 new E175s in 2026 and 16 new E175s for Delta in 2027 and 2028, aiming for a total of nearly 300 E175s by the end of 2028. Additionally, 23 CRJ550s will enter service in 2026.
Debt Reduction: SkyWest continues to focus on reducing debt, with a total debt level $1 billion lower than at the end of 2022. The company plans to maintain favorable leverage ratios and use free cash flow for further deleveraging.
Prorate Business and Market Demand: SkyWest sees strong demand for its prorate business and plans to expand service to underserved communities by redeploying approximately 20 parked dual-class CRJ aircraft and increasing fleet utilization.
Maintenance Expenses: Maintenance expenses in 2026 are expected to remain consistent with 2025 levels as SkyWest brings more aircraft out of long-term storage and services the current fleet.
Contract Extensions: SkyWest announced multiyear extensions for 40 E175s with United and 13 with Delta, ensuring no major E175 contract expirations until late 2028.
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Shareholder Return Plan
Share Repurchase Program: In 2025, SkyWest invested $85 million in share repurchases, doubling the investment from 2024. The company bought nearly 850,000 shares in 2025, which is a 50% increase compared to the shares bought in 2024. During Q4 2025, SkyWest repurchased 268,000 shares for $27 million. As of December 31, 2025, $213 million remained under the current share repurchase authorization.
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Key Q&A
Q:How were the FAA cuts in the last quarter handled, and why was there a significant impact?
A:The FAA cuts were handled in a partnership spirit with their partners, working together to mitigate challenges. The impact was significant due to extensive cancellations, but provisions in their contracts helped mitigate the effects. The situation was likened to a weather IROP event but was more extensive.
Q:Can you provide an update on unencumbered assets and their future trajectory?
A:The company currently has approximately $1.5 billion in unencumbered equipment. This figure is expected to increase aggressively over the next several years as E175s are paid off.
Q:How are discussions evolving around the placement of new aircraft deliveries?
A:The company has 69 aircraft on order with Embraer, with 24 already under contract with major partners (16 for Delta, 8 for United, and 1 for Alaska). Deliveries for 2027 are fully spoken for, and most of 2028 is also allocated. Discussions for 2029 and beyond are ongoing, with optimism about placing these aircraft.
Q:What are the trends in aircraft utilization and the target for utilization recovery?
A:Positive trends in aircraft utilization have been observed, with better-than-anticipated utilization leading to increased block hour guidance. Utilization is expected to continue improving into spring and summer 2026.
Q:How do the terms of E175 renewals compare to prior CPAs?
A:The terms of E175 renewals are economically similar to prior agreements, with some evolution in contract terms due to changing market conditions. The rate economics remain consistent, ensuring a steady revenue stream.
Q:What is the status of maintenance for parked aircraft and their prospects for return to service?
A:20 dual-class aircraft are undergoing heavy maintenance and will soon be returned to service under signed contracts. Additionally, some of the 40 parked CRJ200s are being returned to service, with optimistic revenue prospects.
Q:Can the company capitalize on regional flying growth in Chicago?
A:The company works with major partners under capacity purchase agreements, which dictate schedules and deployment. They aim to operate at high reliability levels to meet partner needs.
Q:How is deferred revenue trending, and what are the expectations for 2026?
A:Deferred revenue recognition was lower in Q4 due to contract extensions. For 2026, deferred revenue recognition is expected to be in the range of $20 million to $25 million per quarter.
Q:What are the expectations for Q1 earnings compared to Q4?
A:Q1 earnings are expected to be flat to down compared to the reported Q4 GAAP number due to sharper seasonality in the prorate business.
Q:What factors could influence the mid-11 guidance for 2026?
A:Factors include increased utilization, return to service of parked aircraft, and prorate business performance. These drivers could lead to higher production and profitability.
Q:What is the company's approach to capital allocation and balance sheet management?
A:The company aims to invest in the fleet, deleverage, and consider share repurchases. They are confident in their free cash flow generation and have a strong balance sheet with liquidity and unpledged collateral.
Q:What drove the increase in lease airport services and other revenue in Q4?
A:The increase was driven by a third-party engine overhaul deal.
Q:What are the prospects for the Charter business in 2026 and beyond?
A:While demand for the Charter business is strong, aircraft availability limits growth in 2026. The company plans to focus on core business demands and explore Charter opportunities in 2027 or 2028.
Q:How does the company compare to internal regional airlines in terms of operational performance?
A:The company consistently performs at high levels in A14 and completion percentages, often ranking as a top-tier performer. They excel in managing operations for four major partners simultaneously.
Q:Are there any liquidity or leverage targets for the company?
A:The company does not have a specific target but aims to maintain sufficient liquidity and balance sheet capacity to capitalize on opportunities. They are in a strong position with low leverage and ample unpledged collateral.
Q:What are the plans for the 40 parked CRJs, and could they impact block hour growth?
A:Some of the parked CRJs are being returned to service, with opportunities expected in the fall. These plans are largely included in current operating plans, but additional opportunities could arise in late 2026.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the terms of E175 renewals, citing evolving market conditions and dynamic contract elements. They also did not provide a clear timeline or specifics for the Charter business expansion, deferring to future opportunities. Additionally, while optimistic about the return of parked CRJs, they did not specify exact timelines or revenue impacts.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Admired Companies
Airlines day
American production
CRJ ERJ
CRJ asset
CRJs service
Companies distinction
Delta return
Delta stability
Delta term
ERJ contract
Embraer Delta
Es United
Es debt
Es delivery
Es order
Es share
Fortune World
Full Results
Inc Full
Leasing maintenance
Results Today
United CRJs
United Delta
accomplishment
agreement United
cancellation
contract expiration
digit percentage
extension agreement
flight reduction
government shutdown
leverage model
maintenance expense
opportunity Es
party
strength
SKYW Transcript
SkyWest, Inc. (SKYW) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call summary and Q&A reflect a positive sentiment with strong financial performance, strategic partnerships, and optimistic future guidance. The company is expanding its fleet, improving aircraft utilization, and maintaining a strong balance sheet. Although Q1 earnings are expected to be flat, the overall outlook with increased block hours and EPS growth is favorable. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8%.
SkyWest, Inc. (SKYW) Q3 2025 Earnings Call Transcript
Positive10-30
SkyWest's earnings call reveals strong financial performance with a 15% revenue increase and significant share repurchases. The Q&A section highlights strategic fleet expansion and potential growth opportunities. Although concerns about tariffs and EAS funding persist, management's optimistic guidance and firm orders for E175s suggest confidence in future growth. The market cap indicates moderate reaction sensitivity, leading to a positive stock price prediction (2% to 8%).
SkyWest, Inc. (SKYW) Q2 2025 Earnings Call Transcript
Positive7-24
SkyWest's earnings call reveals strong financial performance with increased revenue and leasing activities. Despite a cash balance decline due to strategic debt repayment and share repurchases, the company is effectively deleveraging. The Q&A session highlights proactive management addressing supply chain challenges and maintaining flexibility in capital allocation. Optimistic guidance for 2025 and beyond, coupled with market share growth and fleet expansion, suggest a positive market reaction. However, management's lack of specific growth guidance for 2026 may temper expectations slightly, resulting in an overall positive sentiment.
SkyWest, Inc. (SKYW) Q1 2025 Earnings Call Transcript
Positive4-24
The earnings call indicates strong financial performance with a significant revenue increase and EPS growth. The company has reduced debt and continues to generate free cash flow, enhancing shareholder value. Although there were some uncertainties in the Q&A, particularly regarding regulatory approvals and fleet expansion, the overall sentiment from analysts seems optimistic. The market cap suggests a moderate reaction, so I predict a positive stock price movement of 2% to 8% over the next two weeks.
SKYW Report
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