SkyWest Airlines has reached a final agreement with the United States Department of the Treasury for payroll support extension. The airline expects to receive over $230 million in the second round of support.
SkyWest’s second round of support
SkyWest Airlines will receive a total of $233.1 million in the aggregate. The first 50% of the amount was received on January 15th, 2021. The additional disbursement is expected to happen sometime in February 2021.
SkyWest Airlines must follow strict terms that limit furloughs, salary reductions, and layoffs through March 31st, 2021. There are restrictions on the payment of dividends and share buybacks through October 1st, 2022, as well as limits on executive compensation. Employees involuntarily terminated or furloughed after September 30th must be recalled with pay from December 1st through March 31st.
In September, the airline entered into a loan guarantee for up to $573 million from the Treasury. In October, the airline and the Treasury expanded that to $725 million. SkyWest has already drawn $60 million under the facility.
SkyWest’s financial results
SkyWest has fared much better than most other airlines throughout the crisis. In the third quarter of 2020, SkyWest recorded a profit of over $33 million. In the second quarter, it had a net loss of just under $26 million. However, in the first quarter, the airline turned a profit of just under $30 million.
Financially, SkyWest is doing well. The airline’s business model has helped the carrier. Nevertheless, the carrier does have to be careful as the future remains uncertain. Despite some positive signs of rebounding travel in October and a pretty good holiday travel season, travel demand has reduced, and the airline may be forced to fly fewer block hours than it does now, which would mean less revenue for the carrier.
SkyWest’s business model
SkyWest does not operate as a traditional US airline. Instead, the airline flies a fleet of all regional jets on behalf of major US airlines. SkyWest is one of the most well-known regional carriers in the United States, with over 400 aircraft in its fleet.
These 400 planes fly to over 250 destinations, both big and small, on behalf of major US airlines. The airline has partnerships with United Airlines, Delta Air Lines, American Airlines, and Alaska Airlines.
Regional flying has become much more important in the current crisis. The airline’s smaller planes are now finding their way onto routes previously operated with mainline jets amid reduced demand.
In addition, given how some airlines see an opportunity to do more regional flying, the airline is poised for success amid what may be a longer-term structural change in terms of living patterns. Many people who previously worked in offices in big cities have started to leave and move to smaller cities where their money goes further.
These people will also want or need to travel in the future, which would warrant some more flying, maybe with regional jets, or maybe with more mainline flights. Although, regional jets can be a much safer bet since they are easier to fill up.
Are you glad to see SkyWest receive another round of government support? Let us know in the comments!