SkyWest CEO On Fuel Hit: 'Not Concerned About The Pro-Rate Model' Despite 26-Cent EPS Drag
Higher fuel cost SkyWest about 26 cents a share last quarter, and executives said 33 unassigned E-175 slots can be deferred or terminated.
SkyWest Chief Executive Officer Chip Childs said on the company's third-quarter earnings call Thursday that "we're not concerned about the pro-rate model," even as fuel ran about 26 cents a share above what the company had assumed last quarter. SkyWest, a regional airline that flies as United Express, Delta Connection, American Eagle and Alaska Airlines, also said 33 of its 63 firm E-175 orders have no partner yet.
A $13 million fuel headwind
SkyWest reported third-quarter net income of $120 million, or $3.08 a diluted share, on revenue of $1.1 billion, up 6% from a year earlier, according to the call. Chief Financial Officer Rob Simmons said pre-tax income was $159 million, up 15% from the second quarter.
On prorate flying, where SkyWest rather than its major partner bears fuel cost, fuel cost $4.56 a gallon in the quarter, against $3.04 a year earlier. Last quarter's outlook had assumed $3.65 a gallon for the second half, so the actual price left a headwind of about $13 million, Simmons said. Prorate fuel expense was $66 million, up from $34 million a year earlier.
For 2026, SkyWest expects earnings of about $10.60 a share, down from the roughly $11 area it floated last quarter and up from $10.35 in 2025. The fourth-quarter assumption is $4.90 a gallon on 14 million gallons. For 2027, it expects block hours up 1% to 2% and earnings similar to 2026, assuming $4.30 a gallon; each dollar off that price is worth $1.20 a share.
Patience on adding prorate flying
SkyWest added 16 aircraft to prorate flying in the first nine months of 2026. Asked by a Deutsche Bank analyst whether more would come next year, SkyWest Airlines President and Chief Operating Officer Wade Steel said the company would be "extremely patient and disciplined" and add only accretive markets. "If we need to wait a while, we'll wait," he said.
Childs said that with energy costs looking "extended instead of temporary," SkyWest will be "disciplined and patient" even though small-community demand remains strong. Steel said higher yields will not offset all of the fuel increase.
33 E-175 slots still unplaced
Of the 63 E-175s on firm order with Embraer, 30 are allocated to major partners and 33 are not, Steel said. The order is structured so SkyWest can defer or terminate aircraft if no partner takes them. The unassigned jets begin at the end of 2028, and firming them takes a little more than a year of lead time with Embraer.
Separately, the company changed the estimated useful life of its E-175 fleet to 30 years from 22, which cut third-quarter depreciation by $16 million. Cash at quarter-end was $569 million, and $238 million remained on its buyback authorization.
SkyWest said it will report fourth-quarter results in about three months.
Sources
- SkyWest (SKYW) Q3 Earnings and Revenues Miss Estimates — Yahoo Finance
- SkyWest GAAP EPS of $3.08 misses by $0.14, revenue of $1.12B misses by $20M — seekingalpha.com
- SkyWest Q3 2026 Earnings Call Transcript — benzinga.com
- SkyWest: Q3 Earnings Snapshot | wfaa.com — Associated Press
- SkyWest: Q3 Earnings Snapshot | king5.com — Associated Press
