SkyWest Inc.SKYW

Morningstar Rating

Stock Research and Analysis

by Basili Alukos, CPA

Despite SkyWest's position as one of the lowest-cost regional airline carriers, its profits remain tied to the financial health of its main partners, Delta DAL and United UAUA.

Although legacy carriers like United have generally fought tumultuous operating Read more

Bulls Say

SkyWest has long-term, fixed-fee agreements with Delta, United, and Midwest, and its plans to place 28 aircraft into service during the next three years should help drive the firm's near-term growth.

The airline business is extremely labor intensive. Although unions represent three of ASA's employee groups, SkyWest's nonunionized workforce gives it flexibility in its cost structure that many other airlines don't have.

In 2006, SkyWest won a contract to fly 12 aircraft for Delta, beating out the incumbent Comair, Delta's regional subsidy. Clearly, SkyWest was the lower-cost provider, and this low-cost title should create additional opportunities. Read more

Bears Say

With 70% of the firm's capacity made up of uneconomical 50-seat planes or smaller, the firm is likely to face lower utilization rates and decaying revenue growth, if jet fuel prices continue their rapid ascent.

Delta and United account for nearly all of SkyWest's revenue, meaning the firm could face problems if bankruptcy reorganization has failed to transform these carriers into going concerns over the long haul.

SkyWest has previously failed to meet its partners' on-time targets and baggage delivery standards, which resulted in the loss of nearly $4 million of incentive payments. If performance setbacks like this recur, its profitability and high-quality reputation will suffer. Read more

Strategy

SkyWest continues to expand its regional fleet, as evidenced by its recent contract win with Delta. During the next two years, SkyWest will transition away from the less appealing smaller aircraft to Read more

Management

Company tenure and longevity grace SkyWest's executive bench. For starters, president and CEO Jerry Atkin has piloted the firm since 1975. Furthermore, the firm's most senior managers boast more than 12 years of firm experience and have helped guide Read more

Profile

Regional airline SkyWest operates under two wholly owned subsidiaries, SkyWest and Atlantic Southeast Airlines. The firm has roughly 2,300 daily flights to 218 destinations Read more

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