Even as it is actively pursuing four RFPs for new business, SkyWest (SKYW) is exploring diversification which may include either corporate shuttles or expanding overseas as its competitors are doing. In speaking before investors during its third quarter conference call, SkyWest indicated the airline is looking at growth strategies and weighing the timing and development of those opportunities. It was responding to a question alluding to ExpressJet's (XJT) announcement that it was developing a corporate shuttle program for which it already has customers and studies by Mesa (MESA) for expanding operations overseas.

"Both as part of a diversification strategy and growth strategy we are looking at and evaluating the same types of opportunities." said COO Ron Reber. "We are very early in the analysis of those types of opportunities."

Interestingly, it just appointed Margaret "Peg" Billson to its board of directors, currently the chief operating officer for Eclipse Aviation. However, SkyWest said at the time, her appointment did not signal plans to get into the newly emerging very light jet market (VLJ) or per-seat, on-demand business.

The airline is also interested in the Q400 and is pursuing the two RFPs othat require the aircraft. Reber indicated he did not think the growing industry interest in the Bombardier (BBD) 70-seat turboprop was driven by fuel costs alone or is an effort to get around scope clauses. He indicated that the majors have a genuine, strong interest in the turboprop.

"We are pursuing those opportunities pretty aggressively," he told investors, many of whom have yet to experience the aircraft. "We want to get into it in a way that makes sense with enough size to make economic sense for justifying a new fleet type."

As for the RFPs, he noted that while SkyWest was "not making a big deal" out of it, it does have a contract with Delta (DALQ) calling for ASA to get 80 percent of all departures out of Atlanta and maintain its percentage of Delta Connection flights.

"We chose not to make a big deal out of it, because we are confident in our ability to win some portion of flying on the merits of a competitive bid," he said. "But we are subtly reminding them of the provisions but we expect to be a solid competitor just on our own merits."

SkyWest reported operating revenues of $791.8 million for the quarter ended September 30, 2006, a 59.2% increase, compared to $497.3 million for the same period last year. SkyWest also reported net income of $40.7 million for the quarter compared to $30.1 million for the same period last year.

Operating revenues reached $2.33 billion year-to-date, a 90.3% increase, compared to $1.22 billion for the same period last year. SkyWest also reported net income of $114.6 million for the nine months, compared to $73.6 million of net income for the year-ago period. Total operating revenues for the third quarter increased primarily as a result of a 63.3% increase in available seat miles (ASMs). Operating revenues were impacted by a 5.0% decrease in revenue per available seat mile (RASM) and by increased fuel-cost reimbursements by United (UAUA) and Delta. Total operating expenses and interest per ASM for the period, excluding fuel charges of $271.1 million or $0.051 per ASM, decreased approximately 2.2% to $0.088 from $0.090 for year-ago quarter, resulting from operating a combined total of 32 larger and newer regional jet aircraft since September 30, 2005.

Total ASMs for the third quarter of 2006 increased 63.3% to 5.28 billion, primarily as a result of SkyWest increasing its fleet size to 407 aircraft as of September 30. During the quarter, SkyWest took delivery of six CRJ900 and four CRJ200s. The fleet now numbers 333 regional jets (119 United and 214 Delta); 62 EMB-120 aircraft (48 United, and 14 Delta); and 12 ATR72 aircraft (all Delta).

At September 30, 2006 SkyWest had $595.0 million in cash and marketable securities compared to $324.5 million as of December 31, 2005.

Source: SkyWest, Inc.