SkyWest NASDAQ: SKYW reported third-quarter 2026 net income of $120 million, or $3.08 per diluted share, as higher block-hour demand from airline partners lifted revenue while elevated fuel costs continued to weigh on its prorate business.
Total revenue rose 6% from a year earlier to $1.1 billion and increased 1% sequentially. The company reported pretax income of $159 million, up 15% from the second quarter. Chief Executive Officer Chip Childs said the quarter included increased block hours but was affected by higher fuel costs in prorate operations.
SkyWest said its employees operated more than 230,000 flights during the quarter with a 99.9% adjusted completion rate. Childs said the airline was consistently among the top three on-time carriers in the Department of Transportation’s consumer reports.
Fuel Costs Pressure Prorate Operations
Prorate fuel expense was $66 million in the third quarter, compared with $34 million a year earlier and $61 million in the second quarter. The year-over-year increase reflected a $22 million impact from higher fuel prices and a $10 million impact from increased prorate production, according to Chief Financial Officer Robert Simmons.
The average fuel price for SkyWest’s prorate flying was $4.56 per gallon, up from $3.04 per gallon in the third quarter of 2025 and $4.45 per gallon in the prior quarter.
Management said demand in the prorate business remains strong. SkyWest added 16 aircraft to its prorate agreements during the first nine months of 2026, and President and Chief Operating Officer Wade Steel said the company continues to see demand from communities seeking service. However, he said SkyWest will be “extremely patient and disciplined” in adding markets and will only pursue routes that are accretive to the company.
Childs said SkyWest was not concerned about the prorate model despite higher energy costs, adding that the company is seeing “extremely full flights,” substantial activity and continued volume. He attributed some lower load-factor trends to pricing strategies used by partners in response to fuel costs rather than a weakening in demand.
2026 and 2027 Outlook
SkyWest expects full-year 2026 block-hour production to increase approximately 5% from 2025. The company now anticipates 2026 GAAP earnings per share in the “$10.60 area,” compared with $10.35 in 2025. Its prior outlook had indicated earnings around $11 per share, assuming a lower fuel-price environment.
The updated 2026 outlook assumes prorate fuel costs of $4.90 per gallon on 14 million gallons in the fourth quarter. SkyWest said its third-quarter fuel expense created an approximately $13 million, or $0.26-per-share, headwind relative to its prior assumption of $3.65 per gallon.
For 2027, SkyWest expects block-hour production to rise modestly, in the 1% to 2% range, with earnings per share similar to 2026. The company expects to recognize approximately $70 million of previously deferred revenue in 2027, down from roughly $100 million expected in 2026. Simmons said the expected $30 million decline represents an estimated non-cash headwind of about $0.60 per share.
SkyWest’s 2027 assumptions include prorate fuel costs averaging $4.30 per gallon on 60 million gallons. Simmons said a hypothetical $1 per gallon reduction from that assumption would translate to about $1.20 of incremental earnings per share.
The company expects 2027 capital expenditures of about $825 million, including approximately $525 million for 18 new E175 aircraft, around $200 million for recurring maintenance-related spending, and about $100 million for CRJ fleet initiatives and spare-engine opportunities.
Fleet Investment and Conversion Plans
SkyWest took delivery of four E175 aircraft for United Airlines during the third quarter and expects seven more deliveries in the fourth quarter. Steel said the company has 63 E175 aircraft on firm order with Embraer, including 16 for Delta Air Lines, 11 for American Airlines and two for United.
Of the 63 aircraft, 30 have been allocated to major partners and 33 remain unassigned. Those unallocated delivery positions begin in late 2028 and extend into 2029 and 2030, Steel said. The order includes flexibility to defer or terminate aircraft if SkyWest does not arrange a partner assignment.
SkyWest expects its E175 fleet to reach 300 aircraft by the end of 2027. The company is scheduled to receive 18 E175s in 2027, although management said the majority of Delta deliveries are weighted toward the latter part of the year, meaning the full production benefit is not expected until 2028.
The company also plans to begin operating its first CRJ450 for United before the end of 2026. SkyWest expects to operate 40 CRJ450s under contract with United and said the opportunity could potentially reach 100 aircraft. It plans to retrofit CRJ200s used in its prorate business into the new configuration.
Steel said CRJ450 conversions, like CRJ550 conversions, are expected to take roughly two to three weeks per aircraft. SkyWest expects three or four aircraft lines to be out of service during the conversion process in 2027. The company also expects to place the remaining eight CRJ550s in its 50-aircraft United agreement into service by the middle of 2027.
Balance Sheet, Depreciation and Capital Allocation
SkyWest ended the quarter with $569 million in cash, down from $601 million in the second quarter. During the period, the company repaid $119 million of debt, issued $187 million of new debt financing, invested $163 million in capital expenditures and repurchased shares. It had $238 million remaining under its share-repurchase authorization as of Sept. 30.
The company said it generated more than $700 million of EBITDA during the first nine months of 2026 and invested more than $400 million in fleet and related assets since the end of 2025. Childs said SkyWest’s debt is now $1 billion lower than it was at the end of 2022.
During the quarter, SkyWest revised the estimated useful life of its E175 fleet to 30 years from 22 years, citing demand for the aircraft, contract extensions, industry practices and the lack of an alternative regional aircraft. The accounting change reduced third-quarter depreciation expense by $16 million. SkyWest expects total depreciation expense of about $338 million in 2026 and $350 million in 2027.
Childs said the company’s preferred capital deployment priority remains investments in fleet flexibility and cash-flow-generating aircraft, while management expects capital spending to begin declining somewhat after 2027.
About SkyWest (NASDAQ:SKYW)
SkyWest, Inc NASDAQ: SKYW is an airline holding company that operates regional passenger air service in the United States. Its primary subsidiary, SkyWest Airlines, connects smaller and midsized communities with larger airline hubs and provides scheduled flights under capacity-purchase agreements with major airline partners.
SkyWest Airlines operates flights under the United Express, Delta Connection and Alaska Airlines brands, serving destinations throughout the United States and select locations in Canada, Mexico and the Bahamas.
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