Q1 2020 Earnings Call
Good afternoon, and welcome to the Skywest Inc. first quarter Twentytwenty earnings call.
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I would now like to turn the conference over to Rob Simmons Chief Financial Officer. Please go ahead.
Thanks, everyone for joining us on the call today as the operator indicated this is Rob Simmons Skywest Chief Financial Officer.
On the call with me today, your child's President and Chief Executive Officer, Wade Steel Chief Commercial Officer, Eric Woodward, Chief Accounting Officer, and Mike Thompson, Skywest Airlines, Chief operating officer.
I'd like to start today by asking Eric to read the Safe Harbor.
We'll turn the time over to chip for some comments following chip I will take us through the financial results then Wade will discuss the fleet unrelated flying arrangements. Following ways. We will have the customary Q1 day session with or sell side analysts Eric.
Today's discussion contains forward looking statements that represent our current beliefs expectations and assumptions regarding future events and are subject to risks and uncertainties. We assume no obligation to update any forward looking statements.
Actual results will likely varied and may vary materially from those anticipated estimated or projected for a number of reasons.
Some of the factors that may cause such differences are included in our 2019 form 10-K, and other reports and filings with the Securities and Exchange Commission and now I'll turn the call over to chip.
Thank you, Rob and Eric Good afternoon, everyone and thank you for joining us on the call today.
The first quarter at 2020 has been unlike anything we've experienced in Skywest history.
The speed and breadth of the Corona virus health, an economic crisis could not have been anticipated and our hearts go out to those who bought loved ones to this disease.
Response has been focused on three critical areas as you work to navigate within this unprecedented environment and take care of our airline or people and our customers.
First the personal health and well being of our people in passengers is our top priority.
And we're focused on maintaining the cash and liquidity necessary to work through this crisis and third ensuring we're flexible and well positioned for recovery once the viruses contain.
In early March we mobilized very quickly to work with each of our partners to enhance cleaning and disinfecting measures onboard aircraft reduce customer touch points and onboard service and implement CDC recommended social dispensing practices, where possible. We expect many of these changes will remain in place indefinitely.
We appreciate the rapid response in partnership with our people as we work to implement that these updates swiftly and thoroughly.
Our people have demonstrated remarkable team work and support for each other and our customers throughout this event and I'm humbled to be a part of this incredible team.
Our leadership is working constantly to address these challenges that support our people and protect our company I don't want to thank them for their continued dedication and commitment our skywest professionals are simply the best in this industry and I'm proud of the outstanding work that they're doing to help maintain vital air service in these challenging times.
Aero support program funding as part of the carriers that is a critical acknowledgement of the important work. Our people are doing every day, we certainly appreciate Congress and the administration for passing this legislation to support our people.
In April we received 219 million over the 438 million total we're expected to receive over the next several months, which includes 101 million in the form of a 10 year unsecured term loan. This release combined with our work in the marketplace and aggressive cost management will help with our cash position is.
We work to navigate this crisis and ensure we're positioned for recovery.
We'll talk more about our liquidity in a minute.
To provide some perspective on the dramatic demand change.
We would have expected to fly about 2500 daily departures this time of the year.
Today that number is between eight and 900 departures each day.
In some ways, that's significant reduction can be more difficult to manage with a fleet of over 500 aircraft and fewer opportunities to get crews and aircraft in position.
So we're hopeful this will not be the case indefinitely, we expect to see similar departure count throughout May and June and are prepared to respond as necessary in the climate continues to deteriorate.
We're working closely collaborating with and collaboratively with each of our partners to provide flexibility and options for their needs as Wade will share we're working with each of our partners to provide creative solutions and support including temporarily waving contract minimum type of provisions temporary rate reduction and passing through the benefit of certain.
Aircraft ownership payment deferrals, which we have negotiated with our primary credit providers.
As we've discussed many times over the past several years remain we remain focused on ensuring where the best position to meet our partners need.
Across our operation. We've also quick we've also worked closely with our people to take steps to manage costs. In this environment. This includes providing offerings for voluntary time off early retirement opportunities and other reduce and flexible work schedules where possible we.
We deferred some of the heavy maintenance that was previously plans, we work with our partners to align fleet deployment with new schedule.
We've reduced our parade footprint.
Fine while complying with the requirements under the cares that we've also suspended training and initiated a hiring freeze on all positions until further notice.
As of today, nearly 5000 employees have elected to take voluntary time off for one to six months. This is an important cost measure that also helps us better navigate to significantly reduce schedules were currently operating.
Following health safety and liquidity, we're focused on positioning for recovery given the current environment and sharp reduction in travel we expect that will be quite some time before demand fully returns. It is likely will need to streamline and re size our airline in the near term to ensure our long term viability and success Theres a real.
Possibility it will be a smaller airline by year end.
Definitely the next several months will be turbines.
We are taking every possible step to ensure our foundation remains strong and we're best positioned for recovery when the time comp we remain disciplined in flexible on our approach with our fleet and our partners as demand returns. We are confident our fleet will continue to feel a critical road role and returned to travel.
The core values at Skywest I've seen it through many challenges and as most of you are aware. We've spent the last several years focused on eliminating fleet tail risk operating risk and contract with the focus on reducing our overall risk has helped to shore up our solid foundation for long term sustainability.
We're focused on navigating this crisis aggressively and deliberately to take care of our people in our customers as we preserve our liquidity and plan for recovery. The environment just weeks ago is dramatically different than today, but our fundamental principles of agility strength and discipline as well as our objective to continue to meet our partners.
Needs remain unchanged, we have a track record of adapting quicker than anyone to our partners needs and we're very focused on maintaining that capability.
We will continue to work together with our people in our partners to ensure we emerge as a better stronger business I want to think again our people.
As well the administration and our business partners, who are aiding in our long term stability I'm proud of our airline and our teams in the great work, they're doing to support each other and our long term success, Rob will now take us through some of the financial data.
Today, we reported first quarter net income of $30 million or 59 cents per diluted share our diluted share count for Q1 was 50.6 million shares and our effective tax rate in Q1 was 23.3%.
Let me start today with the balance sheet, we ended the quarter with cash of $578 million.
From $520 million last quarter, our capex during the first quarter was $77 million, including 55 million and spare engines and 22 million for other wrote a bulls and used aircraft.
At this point, our expectation is to pull back our capex for the year from $636 million last year to $3 million to $400 million this year, including the acquisition of six new Eone hundred 70 fives by the end of the year.
We ended the quarter with debt of $2.9 billion down from $3 billion as of yearend.
Let's talk about liquidity, our March 30, Onest cash position was $578 million. In addition to availability of $65 million on our revolving line of credit.
During April we received $219 million in payroll support funding under the cares Act.
Another $219 million will come in three additional payments. This summer as you will recall $101 million of the 438 million in PSP funding is in the form of a 10 year term loan with a 1% interest rate for the first five years with the remainder in agree.
Yeah.
At quarter end, we had unencumbered assets of over $1 billion, primarily in the engines and aircraft. This unpledged collateral gives us additional liquidity alternatives, which we will evaluate including $497 million in senior secured term financing under the law.
Loan program of the cares Act, we have formally applied for this loan program through the U.S Treasury, but we have until September thirtyth 2020 to decide on our participation level if any.
Based on ending March cash or 575 million and including the initial PSP funding of 219 million received in April we ended the month of April with strong liquidity and there's still undrawn revolver.
Current cash modeling over the next 18 months indicates that without any additional debt draws other than the ordinary term debt.
Finance the six you won seven fives expected to be delivered this year, we should end 2020, approximately $100 million lower in cash than where we stood at the end of April. This number assumes the follow up $101 million in PSP notes is outstanding at year end.
Along with $34 million in payroll tax deferrals.
All in 2021 and 2022.
So cash burn through the rest of the year is the net 100 million dollar reduction in cash from May to December 101 million in the outstanding PSP notes and $34 million in payroll tax deferrals, a total of $235 million in total.
We made it cash burn over the remainder of the year.
The mass for the remaining eight months of the year made through December is $30 million burn per month on average or 1 million dollar burn per day, our current modeling subject to many uncertainties in with modest recovery in flying and incremental cost rationalizations assumed by year end.
And is that the cash burn improves in 2021.
This demand disruption event shines a spotlight on the importance of how we have been de risking our business model over the last five years.
Well no one in our industry is immune to the economic effects of the cope with crisis, we appear to be reasonably position to weather the storm.
The economic effects turned out to be worse and the recovery slower than we currently expect we have additional liquidity tools, we can call on including our revolver. Our 497 million dollar allocation of secured cares act loans and other secured loan alternatives.
Yes by putting our $1 billion and unpledged collateral to work.
In addition to our core liquidity position you can quickly identified three things that are nice to have during this time of uncertainty that give us more flexibility than others in our space number 135% of our fleet has no financing remaining on it this number goes to 45% window.
You include partner owned aircraft that we operate number two.
We have $1 billion, an unencumbered assets in the form of engines in aircraft. This gives us the optionality for incremental liquidity in the form of secured borrowing as needed.
And number three minimal tail risk of around $100 million. The dollar delta between financing term and contract term. Our next pocket of tail risk is now allowed to 2023 and is zero on the delta to hundreds expiring later this year.
Let me address specifically to cope with impact on our Q1 results are $39 million in pre tax income is roughly $45 million lower than what we would have hoped to generate in Q1.
25 million if that is primarily from lower pro rate revenue in March as demand evaporated.
The million is from accelerated depreciation on upcoming comp contract expirations that are not expected to be renewed.
And 5 million is from the adoption of the new credit loss standard in Q1 and other items.
Especially in times of great uncertainty like this and consistent with our policy in practice, we're not in a position to give any formal or informal EPS guidance. At this time. It goes without saying that this coded event has been a setback to our plans, but I would highlight the 330 so.
7 million Grand component of the PSP to be received over the course of this summer as expected to be recorded as income Ratably in Q2 in Q3, we will obviously give additional color on our outlook as appropriate down the road.
Wade will now give some details on fleet initiatives fleet movements and other commercial opportunities Wade.
Thank you, Rob I'll provide a fleet status update as well as an update on our pro rate and leasing businesses to recap some of our agreement at a high level. We were scheduled to add 51 aircraft to our fleet in 2020 and 12 in 2021. This included 32 aircraft financed by our partner.
Others as well as 26, new aircraft and five used aircraft financed by Skywest, taking the current travel environment into account, we still anticipate taking delivery of these aircraft. However, we are working closely with our partners and manufacturers to adjust the timing of these deliveries.
To update by partner, we currently have six new Eone hundred 70 fives on order under our Delta agreement, we still anticipate taking delivery of all six aircraft this year and working through this schedule with Delta and Embraer.
We're also scheduled to take six used eone hundred 75 sourced from another operator into Delta service. We have received all six aircraft three of which are currently in service. We anticipate the three other aircraft will begin service late this year, we expect that our final Crj 900 scheduled for this.
This quarter will be delayed and we're working with delta and bomb BARDA on delivery timing.
You may recall that we have 55, Crj 200 scheduled to expire under our Delta agreement at the end of this year and we're working with Delta on their long term 50 seat needs in the event. These aircraft are not renewed we've returned 19 of the aircraft back to Delta the remaining 36 aircraft or Skywest.
Stone with no remaining financing obligations and we will be fully depreciated by year end.
Under our United partnership, we signed an extension for our 70 Crj two hundreds in February February with an average extension term of three years. Both parties have early termination rights for a certain number of aircraft starting in the end of 2021.
Our previously announced 25 used Eone hundred 75 aircraft will be placed into service Ratably under 12 months beginning in the third quarter of this year. These aircraft are financed by United and we source from another United Express operator, we're working with American to adapt.
Aircraft deliveries and service schedules to the current environment, we have anticipated taking delivery of the first 10 of our 20, new Eone hundred 70 fives this year and the remaining 10 during the first half of next however, we do not expect these two arrived this year or in early 2021.
We'll provide updates on the new delivery schedule as it is finalized and while we originally planned for our for our 10 previously announced Crj seven hundreds to be placed into American service. This year. We now anticipate that timeline will move to early next year as chip mentioned, we're working with all.
All of our major partners on contract flexibility, including temporarily waving contract minimums deferring the startup contracts temporary rate reductions during Q2 in Q3 and passing through the benefit of deferring certain aircraft ownership charges that we have negotiated with our primary creditors.
We are working proactively with each partner to provide creative solutions to the current challenges.
Let me talk a little bit about our pro rate business.
We were working with our major partners to transition several prorate markets to contract due to anticipated growth. This year with pro rate reduction scheduled. This April we now anticipate our pro eight block hours to be reduced by approximately 60% during the second quarter, while still providing service in compliance with the provisions of.
The cares act during the month of March our pro rate revenue was lower than our expectation by approximately $25 million. We now expect our pro rate revenue will be approximately $100 million less during the second quarter of twentytwenty compared to 2019.
Let me shift gears to our leasing business. We have delivered 16 of 29, Crj 700 aircraft under leases to a third party.
Let's see has requested that we paused delivery on the other 13 aircraft.
Let's see has extra ordinary financial issues and we are evaluating all of our options under the lease. We have also agreed to purchase Sevenup Crj seven hundreds from a third party at quarter end, we have closed on five of the seven aircraft, we expect to close on the other two during Q3 of this year.
These are unprecedented times, we're committed to working with each of our major partners to provide creative solutions and to respond quickly to their needs. We have spent the last several years, reducing risk and enhancing fleet and financing flexibility, which will ensure we're positioned to navigate this challenging environment.
Okay, operator, we're ready for the Q in a section.
We will now begin the question and answer session.
You asked a question you May press Star then one on your telephone keypad.
If you're using a speakerphone please pick up your handset before pressing the key.
To withdraw your question. Please press Star then too.
This time, we'll pause momentarily to assemble our roster.
The first question comes from Joseph Denardi with Stifel. Please go ahead.
Hey, good evening everybody.
Robert can you just talk a little bit about or chip. The the maybe the size of the fleet as you see it kind of realistically.
On the other side. It is another lot of moving parts and I'm sure you're having negotiations, but can you just.
Talk about just given what's happened to the mainline fleet that your partners.
Obviously less demand for your service how you see the fleet shaking out thank you.
Thanks, Joe This is chip.
Certainly say that we're anticipating a smaller overall fleet.
[music].
Part of what we also tried to evaluate is how much that fleet is going to be flown.
Today, we are applying a fair portion of our fleet, but when you move from 2500 daily departures down to seven Reight hundred departure is your you don't have a ton of utilization.
Relative to that fleet so.
Overall look the conversations are fluid.
The entire industry is looking for additional demand data as we emerge out of.
The traditional locked down the we've experienced the last several weeks and within those data points. We continue to watch what our partners or asking us to do we will also say that we're in very fluid conversation, but I think it goes without saying that will likely be a fair bit smaller by the end of the year potentially.
10% smaller and we have a lot more data to pay attention to before we can get any more clarity beyond that at this time.
Okay. That's helpful and then Rob can you just talk.
Kind of at a high level since I'm sure some of that sensitive, but how do you ensure that you kind of balance being flexible for your partners without taking on too much of their risk onto your balance sheet.
Thank you well.
Let me start and maybe wait 10 also should been here, but I think that as far as our ability to be flexible we were proud that we're in a position to be able to be helpful.
To our partners. We've got the we've got relatively strong liquidity right. Now in addition to other liquidity options that are made.
Possible to us by the fact that we went into this crisis with a billion dollars of Unpledged collateral that we can deploy a if need be.
Down that down the road, but obviously, we're trying to to be collaborative and helpful to our partners at the same time make sure that we've got adequate liquidity for ourselves.
Okay. Thank you.
Yeah.
The next question comes from.
The fifth with.
Raymond James Please go ahead.
As Rob.
Really appreciate the color on on cash burn and liquidity and walking us through those numbers as well, but can I ask what you are assuming in the cat that cash burn profile that you provided is it that just says no change in the current flying or like how are you kind of building that bridge.
Temporarily waving those minimum during the second and third quarters and so we are flying about 60, you know we have a reduction of about 60, 65% of our flying right now and so that's that's why there has been some variability in the in the.
<unk>.
And then can you can you give us a sense for what is still getting paid versus what is not getting paid so for example.
On on the aircraft ownership pass through if you if you debt financed a new e. 175, but it's not being utilized are you at least being reimbursed for the aircraft ownership and how does that factor into your willingness to kind of take more onto the balance sheet.
Yeah. So that's that's a a good question. So the in the example that you gave their as we've talked about as Rob talked in his prepared remarks, we've worked with certain creditors I'm getting a deferral incentive up some of our ownership charges and so during this period of time, we have differ.
Or certain ownership charges to our major partners based on the differ that we've received from the creditors.
Okay, and then just lastly on on payroll support so you're getting reimbursed for for the labor costs that you're carrying and and those folks are not being utilized are you getting any requests from your partners.
For credit for the credit you're receiving.
So so joined great. Great question. So we we obvious they're working with our partners very close and we you know the cares money is for payroll right and that is very clear and we are being extremely diligent around using that money for our payroll folks were also working with our partners as I've said during.
The second and third quarters, giving them rate reductions to help with some of the issues that they're facing so you know we're being very diligent around the cares money.
Okay, and then and then just lafley for for those of you that were I I don't think there's any good analogy to to pass periods here, but if you think about you know post 911, and a decline in short haul traffic and people you know more willing to drive for a period of time, how does the how does the regional model.
Fit with that right like deep do you lose share to drive on the other hand, I would've thought that it makes a lot of sense to down gauge higher trip cost main line aircraft, two regionals, which would actually be a a potential growth catalyst for you on the other side, but.
But maybe maybe that's hard to achieve in the current scope construct so so just big picture. How you think about this longer term from a demand driver perspective.
Yeah. So Dwayne. This is chip you are looking at this exactly right you know there. There's so many different factors relative to the regional model, particularly when you go back to 911 and you go back to the financial crisis about what elements do we see smaller aircraft, gaining you know advantages or you know.
Being gaining having some handicap in some of the recovery process look I still go back to one statistic that.
<unk> Air travel is.
By Matt any math, you look at Disney safest travel and always has been for the past several years or decades, now even adding the risk of covert onto that model I still think that air travel, particularly you know relative to what we do is still the safest mode of transportation. So the bigger question is going to be you know.
What is the overall recovery process look like the data and statistics or relatively clear. We're also you know deeply engaged in many activities with our partners and other carriers to just try to fix you know this this the air their system that we actually traveling relative to what.
What is the new normal we know this the that everyone is going to need to be wearing a mask. We know the T.S.A. is going to be wearing a mask. There's a lot of infrastructure things that we're working on to get to the number. One question that you brought up is bringing back to man.
We think that there is some advantages relative too small town flying that we go to law, we think there's advantages to having a smaller aircraft with shorter shorter duration of flights and you know good strong trip costs compared to what some of the other elements are so look doing I wish we had more answers about this.
In in a nutshell, you're looking at all the right variables that we're looking at we're having conversations with our partners on all of these variables and we're excited and very very engaged to see some of the opportunities that will emerge as we get more data points as we come out of the you know the locked down processing, what happens you know relative to demand.
So and again back to the points you know we're doing things in the industry. We we.
We've never done as well as we'd do today I mean, our aircraft are so amazingly clean they were clean before but what we're doing turns overnights mid day everything and how are people are trained to handle this crisis. The flying public is once they start are going to get.
We believe a tremendous amount of confidence in the product.
Given the math and we talked about earlier in the response about how safe it is to fly or even with the risks that we have associated with this with this current crisis.
Yeah. Thanks, I mean, obviously, there's some practical limitations vis-a-vis scope.
As they shrink, but I would think that you're aircraft would be ideally suited for help them, helping them rediscover where demand actually exists. Thanks for taking the questions guys. Thank you.
The next question comes from Mike Linenberg with.
Richard Bank. Please go ahead.
<unk> just a couple of here I think so we'd I think if I heard you rate you said that flying would be down 60% to 65% <unk> Zimmerly, you're talking about you know blocking rooms on the.
The C.P.A. businesses that is that right.
That's correct Michael.
<unk> is point are you still planning for down 60% to 65% or is the schedule.
<unk>.
It's still really really early for that you know, we're obviously working with our partners, but we do anticipate that that they're you know and all the modeling that we've done we anticipate that the it'll still be suppressed during that quarter as well.
Yeah, when we think about through the <unk> <unk> sleigh, there are things that you know like two weeks.
You need <unk> you were getting <unk>. It's you know call it per cents of <unk> Austin's a full number since we think that on the least on the contract signs. The block is down 60 to 65 to the actual revenue B.C. should be.
It should be down, but not nearly as much you know sort of incorporate some of the.
Discounting rate reductions in the like that you're providing you know that.
You should see as big of a song for that is that isn't accurate.
Yeah, you understand or motor pretty good.
Yeah.
Over on the pruning and I I I need me turn but it.
<unk> indicated <unk> <unk> <unk> should began 60% and that's about 100 mean, some revenue than what you generating you poop is probably business and 29 key in the March quarter huge was prorate down.
Yeah. So for the the the month of March you know and the quarter was about $25 million less than what we expected it to be okay. So I got that number on revenue, but do you have on just on the percentage.
The the percentage of flying so what block hours, maybe how much a lot of course, we're yeah. The block hours were very consistent with the prior periods. We hadn't we weren't we didn't have the ability to pull it down I seen marquez jumped on us pretty quickly so the bark hours for <unk> still high.
So that makes sense then back to just the you know sort of <unk> digit furlan ownership costs, you know where you've reached out to you know your creditors and asked for relief and of course, you're you're passing that onto your your <unk>.
Presumably you know I don't know if it's a three month benefit a six month cash flow benefit, but ultimately you know that will ramped backed up and so the back half of maybe you know months nine through 12 or months 12 to 15, we're going to be looking at you know much higher ownership charges.
You aren't <unk>.
Emily Your partners are in agreement with you that when they jump up a lot and you will go up above and beyond what they normally are that they will cover 100% of them is that.
Is that the understanding.
Yeah. So on the topic of the <unk>, we're not we can't get into the the specifics exactly what it is but it is you know an interest in you know in principle type differ over a time.
Okay and part of that will.
We'll be recaptured some of it will be recaptured by being re advertised over the remaining a life for the contract.
Okay. That's great and then Rob you you had added up to numbers and I think I just I didn't hear you maybe my phone cut out for your cash or liquidity position at the end of April what was what was that number as of April 30th.
Yeah, we didn't we didn't give it actual number Michael but we we did you know just to point out that we did and a quarter with $578 million of cash and then during the month of April we received again the first half of our P.S.P. funding. So you know, we we clearly and to be end of April.
In a in a solid liquidity position.
Burned numbers are measured you know from that you know may 1st through the.
Through the end of the year, the the 300 $235 million of cash burn over that eight month period is how you get them out to a million dollars a day or burn on average.
I just I was curious just the starting point because we we don't we don't know what the cash burned ones for the month in April, but presumably it was more than a million right and I'm just I'm I'm trying to get to that April 30th number okay. Okay, but like you said it was a solid level and then just my last one I apologize for all the questions. There was a lot of detail that was covered your your E.S. markets.
Oh, I know that historically, you're guaranteed some profit or maybe you have to have a certain volume to meet requirements to get whatever that 5% or 10 per cent.
Maybe it's a 5% operating margin I believe you had more E.S. flying been in carrier out there and that's a big part of your prototype business. So I was I'm I'm curious because I know the E.S. pool, what does it 250 million a year and I suspect that you know you were getting a good portion of that but maybe maybe you're not can you talk about that E.S.P.S. and maybe why it's not.
Showing up in the parade in when the parade is getting hit so badly and.
Yeah. So the the D.O.G.I. Michael this Wade again, so the D.O.T. I don't know if you saw that they came out recently and gave some relief to the carriers that they could cancel on yeah. So they can council some of the frequencies in their markets and still get some of the subsidy and so.
Starting may 1st we we have been doing that is canceling some of R.E.A.S. markets. We still have service there seven days a week, but instead of operating to fight today. We're operating one the numbers that I gave you were passenger revenues that did not include the subsidy numbers.
Okay, So [noise] pass new revenue.
Could be down a bit but some of these markets may still be profitable because of the subsidies that is that air point.
I I doubt there'll be profitable were we'll we'll obviously the demand is so small in these markets right now and the D.O.T. has been very helpful and <unk> letting us reduce the frequency, okay, and so I I highly doubt we will be profitable, but you know obviously, we're we're looking at that okay. Yeah. That's.
<unk> okay. Thanks, Thanks for all the time gentleman.
Thanks, Michael.
The next question comes from Conner coming him with Caroline things go ahead.
Hey, guys things from the time My my Cat asked a bunch of my questions, but just maybe I'm I'm releasing business I I assume that you guys are differing symbols lease payments are at this point can you just confirm if that's the case or not.
So as I said in my prepared remarks.
Yeah. We we've we've have 29 airplanes that were supposed to put into service with one are less eat we've actually pause that deliveries you know we're we're currently working with the last C. right now on on how we handle some of their challenges they are in the extreme financial difficulties right.
Now and I don't want to talk about specifics, whether you know, we're giving deferrals or not at this point, we are working with them very closely.
Okay Fair enough and then just on the so you you said the 55 aircraft coming out at least this year just <unk> I think that's the only only thing that's coming out from these are coming out. The C.P. has this or is there anything else that that could come up potentially 2020, and then maybe you can updates on 2021 I don't think there's much there.
Either but just curious your thoughts on that because there's I mean in the past like shrinking and you guys refocusing has famous hugely beneficial to your so your overall profit noise just curious on your thoughts on both both aircraft coming up.
Yeah. So obviously I I talked about my prepared remarks, there are 55 airplanes that are coming out of contract with Delta.
That is all this coming out of contract and 2020 and 2021.
You, obviously, we're we're exploring all kinds of alternatives with with those airplanes, including working with the current partner to potentially renew but we have not got anything done yet.
Oh and then we also have I I talked about in my remarks, we have 51 airplanes on on the order right and so you know we obviously have you know the the six delta airplanes that are still coming this year you know and then we have six used airplanes coming for Delta.
We also have taken delivery of 25 used one seven fives and our United Fleet and we're just working with them on the on the in service days on the American Fleet, we still have 20, new one seven fives and we're working with them also on the in service dates on though so.
Okay.
Maybe just to to follow up on Twain's Twins question I would think that.
When all this settles that you know the trends that are already occurring are going to continue I, probably speed up so I would like I I would think that the moved to larger regional aircraft disputes a significantly rabbits and slows down so I mean.
What's your view on scope when all but it seems like I mean, I'll I'll always airlines are gonna be smaller, but it seems like this would be the time that the contracts would actually we work in your favor. So just I mean, I know, it's a touchy subject, but curiously behind me thoughts there and thanks to the time.
Yeah. They this is chip you know I would I would you know relative disco <unk>, we we're.
We've always managed our business planning that there would be no news scope at our partners and we're going to continue to do that.
We fundamentally I mean I respect your your hunch there were hope that what you're thinking is is obviously true but at this time you know when none of US can answer that if there's a lot of questions what happens on the other side of this.
We're hopeful for but there's so much things between here and the other side of this that we have to do right you know within our strategy otherwise predicting what it's going to look like won't even be an option. If we don't handle what's in front of us. The next six months and we and we execute on it as good if.
Not better than we have in the past four or five years and that that's the key part of US I mean, we're we're hopeful with what the market in our partners may see happening on that but look you know we've we've just got so much in front of US that we are we are literally going to bury ourself and so that we execute what we need to execute N.B. discipline.
And with you know with everything that we have to execute it here in the in the short term because that's probably going to determine more about what it looks like on the other sides and then you know trying to trying to you know speculate on that so the gray question. We're optimistic but we are extremely focused on what's going to happen. The next two to three or four.
Or five months.
Fair enough. Thanks again.
The next question comes from Catherine O'bryan with Goldman Sachs. Please go ahead.
Hi, this is actually truly suffocating. Thank you for gaming question.
You had alluded to various things that you're helping your partner's just from waiting to contract noon provisions to temporary rate reductions just wondering how you characterize that release that you've granted have you noticed partners lean on any one option whether the others.
Joys. This is way to you know it's it just it we work with every one of them on their specific needs. You know each one of the contracts are different we have very large commercials agreements with every one of these partners <unk> every contract is unique and there's different lovers that we can poll and so they're they're not.
Leaning on one or another <unk>, obviously, it just a lot of it depends on how the planes are owned and financed and and how we can help them.
Okay.
Oh, then use all those options on.
Yeah, and and and this is chip <unk> I think the other thing is I mean, the one common fact with everybody is cash obviously and and look this is what we build ourselves into over the past you know several years is that we wanted to be able to have contract flexibility, we want to be able to have you know flexibility within our restructure.
To be able to provide any type of of a assistance and each and every partner is unique in the fleets, we fly and and what we can do for them and what they value.
Like I say caches, obviously been the one <unk>.
Constant thing that they all.
Sub for help with and and however, we can do that in the framework of making sure that we are stable and take care of our people will continue to do what we feel like we're really good at and that is the collaborative with them I'm provide value to them.
God that that makes sense just one last one then too you mentioned that the release is temporary just for Q. 10 Q3.
Should we expect to any of these could actually translate to be more permanent and is there any recourse you'll be pursuing if these are permanent cuts just given that you're staffing fleet were built around these.
Contracts <unk>.
Yeah, I would probably add a couple of things to that and and like I've said before on the call we're evaluating.
You know what all this looks like we're you look at the demand numbers looking the recovery numbers you look at some of the things is that the entire industry is reviewing I would go backwards and lean on what we what we've built this airline on and that's good strong relationships I'm not going to speculate what's gonna happen you know in the fall.
Like I said, we have a lot of internal things to do here to to evolve as well and you know until we get to the point, where some of the temporary relief.
You know kind of comes to fruition, we're going to approach each of our partners as well as our people with eyes wide open and being able to you know achieve the goal of being a strong liquid airline in the long run that that can is one of the best providing what the flying public wants so in in essence, I don't know that we're going to come.
Any more than that but but like I said out reiterate we have a lot in front of us that we need to execute and and collaborate with our partners on you know long before we get to the end of the pen for everything.
Got it didn't answer.
The next question comes from Steve O'hara with Saddam again company. Please go ahead.
Good afternoon, and thanks for taking the question.
<unk>.
So I mean in terms of the you know your partners and and you know the flying that you're doing versus some of your peers I'm. Just I mean, you get the sense that I mean, you know it doesn't seem like a a lot of the other regional partners might have the same type of flexibility and.
Really need to be as helpful. As you guys probably can be.
And I'm just wondering I mean is that.
Only the case.
And <unk> you know from what you know.
Do you think you know the flying has been reduced kind of across the board or you know you guys may be doing more of it or you know maybe even less of it because if you're a willingness to be flexible.
So the great question I I think the number one answer the back half your questions first.
Probably the number one determinant of level of flying across the country in within the original industry is geography, you know where where we have shorter all flying.
Across state lines, some not across state lines. There certainly is some of things that have happened relative to those who fly in New York San Francisco L.A., The Pacific Northwest, we've seen it of all over even eight or nine weeks and that's the number one I think determined to know what's happening within each specific.
Pick area on if the carrier is flying or not I don't know that there's a terrific amount of just overall preference relative or the first part of your question and what what's happening with pairs, we really don't focus a ton on that we just we just take a very strong approach to what we can provide the.
The relationship with our partners are a lot more important than what we're trying to do with our competitors by the way so that that that's kind of this number one catalysts that we continue to.
To try to be very very fluid on and we don't necessarily put a yardstick out there to see you know how we're measuring up with others relative to this it's just the relationship with partners is is you know hands down next turn only what are what our priorities.
Okay No that's helpful and then.
I guess in terms of your you know.
This the <unk>, you're willing to go to be collaborative and things like that that's why I mean, I assume you know with you guys just kind of stayed away from him in a I mean would it would that.
You know would you kind of go back into that Arena again, you know in an effort to.
You know if maybe if you got a clear picture on you know what the demand outlook look like and things like that I mean is that something that you you would consider again, where you're kind of you know that <unk> is you know kind of road you don't want to go down again.
We would never go down the road, we have in our history again, but we definitely would work very collaborative collaboratively with other way to provide you know significant.
Type of value from that perspective, you know relative to what we could do for them, but but our historical model of acquiring other aircraft, we would not do that again.
Okay.
Thank you very much.
This includes the question and answer session I would now like to turn the conference back over to chip child for any closing remarks.
Thanks to everyone again for joining us on the call today as I said early arm remarks. These are times that we have never seen in our history time that we never predicted would come but we are appreciative. The people that are here at sky west and their level of him.
Gauge meant on this issue.
And and from a very you know high level. If we're all around this table so humble to be a part of such a great.
Company with such outstanding professionals, and with partners that have we have a great relationship with and we look forward to to working our way out of this we think this will be a time that we'll be in our history Burke books that we hopefully can look back on and remember how it to find us to become a better airline going forward. So.
With that again, thank you for your interest and we will talk to next quarter.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.