SkyWest transitions from 50-seat aircraft with Bombardier agreement

Utah-based SkyWest Inc., parent of regional carriers SkyWest Airlines and ExpressJet Airlines, announced Dec. 13 the company has entered into a termination agreement with Bombardier covering the Canadian manufacturer’s residual value guarantee (RVG) agreements on 76 CRJ200 aircraft owned by SkyWest Airlines and American Airlines.

Bombardier will pay SkyWest $90 million by January 2017 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,” SkyWest said in a statement.

Additionally, SkyWest announced it will remove its Bombardier CRJ200 aircraft from ExpressJet service over the next year, as the company transitions from 50-seat aircraft to primarily dual-class aircraft. ExpressJet and American Airlines have agreed to place 12 dual-class CRJ700s into service under a multi-year term, reversing a previously announced early lease return arrangement for the aircraft, the announcement said.

In total, SkyWest has 157 CRJ200s in its fleet, 52 of which are flown under ExpressJet Airlines for partners United Airlines, Delta Air Lines and American Airlines.

The announcement comes as major US airlines are seeking to upgrade regional service from 50-seat to 70- and 76-seat aircraft.

SkyWest said the company is evaluating its total 50-seat CRJ200 fleet and related long-lived assets for impairment in the 2016 fourth quarter, anticipating a pre-tax impairment charge in the $440 million—$490 million range for the quarter.

“Streamlining our fleet and taking early settlement of Bombardier’s RVG obligations reduce both our overall risk profile and the future investment that would have been required in the CRJ200 fleet,” SkyWest president and CEO Chip Childs said. “These moves strategically position us to continue to deploy our capital against our best investment opportunities and are expected to help improve future liquidity and fleet flexibility.”

Bombardier Commercial Aircraft president Fred Cromer said, “Being able to extinguish these future liabilities at a significant discount highlights the positive utility of the aircraft as well as Bombardier’s strong liquidity position, our proactive cash management approach and better positions us to achieve our goal of breakeven free cash flow by 2018.”

(Mark Nensel - ATWOline News)