SkyWest announces additional fleet transitions

SkyWest reported additional fleet transitions and contract updates designed to reduce SkyWest’s long-term fleet risk and enhance its ability to respond to changing partner needs. Specifically, SkyWest’s ExpressJet operation expects to transition to flying primarily dual-class aircraft in its CRJ operation by removing its CRJ200 aircraft from service over the next year. The removal of the CRJ200 aircraft reduces ExpressJet’s future required investment in its 50-seat fleet and is expected to improve the airline’s operating efficiency by eliminating an aircraft type from its platform. SkyWest also said that ExpressJet and American Airlines have agreed to place 12 dual-class CRJ700s into service under a multi-year term. These CRJ700s had been scheduled to be removed from service under a previously-disclosed early lease return arrangement. Additionally, SkyWest and Bombardier entered into a termination agreement covering Bombardier’s residual value guarantee (“RVG”) agreements on 76 CRJ200 aircraft owned by SkyWest Airlines and ExpressJet. Bombardier agreed to pay SkyWest US$90m by January 2017 along with certain other consideration in exchange for the release. Both the required sale of each aircraft and the cost to SkyWest of returning the aircraft to mid-time condition were points of risk and uncertainty for SkyWest that this termination agreement eliminates. As a result of the expectation to remove ExpressJet CRJ200s from service and the Bombardier RVG termination agreement, SkyWest is evaluating its total 50-seat CRJ200 fleet and related long-lived assets for impairment in Q4 2016. SkyWest currently anticipates it will record a non-cash impairment charge in Q4 2016 estimated to be in the range of US$440m to US$490m (pre-tax) on its CRJ200 aircraft and other 50-seat aircraft assets, net of the US$90m in cash proceeds from the Bombardier termination agreement.