Skywest Airlines expects to post a $7.46 million net profit after tax for the 2010 financial year.
Skywest Airlines expects to post a $7.46 million net profit after tax for the 2010 financial year.
Skywest, the parent to the Australian and South East Asia regional airline and other subsidiaries, has released its unaudited results showing it recorded revenue of $178 million in 2010.
The company expects to pay a dividend of 1.10 Singapore cents per share.
In a letter to shareholders, executive chairman Jeff Chatfield, said that the last 12 months of the company's operations had been conducted in an extremely volatile operating environment.
"Customer attitude was affected by massive changes in the activities of the resources companies and the Airline noted fluctuations in its charter business due to the response of these companies to changes in the Australian taxation regime, especially in respect to the Federal Government's proposed then aborted Resources Super Profits Tax," he said.
See full letter from the executive chairman below:
Dear Fellow Shareholders,
On behalf of the Board of Directors, I am pleased to present you with the unaudited financial results for Skywest Airlines Ltd (the "Company") and its subsidiaries (the "Group") for the year ended 30th June 2010.
I also take this opportunity to update you on the development and progress that our Group has made.
The last twelve months of operations have been conducted in an extremely volatile operating environment for the Airline. Customer attitude was affected by massive changes in the activities of the resources companies and the Airline noted fluctuations in its charter business due to the response of these companies to changes in the Australian taxation regime, especially in respect to the Federal Government's proposed then aborted Resources Super Profits Tax. The uncertainty had an impact on our customers and therefore the second half performance was not as strong as expected and the Company believes that the proposed Resources Super Profits Tax caused a weaker overall profit result than would have otherwise been achieved.
Despite this uncertainty, the Board and senior management navigated the Group through the period to deliver a satisfactory profit. The overall result for the year comprises a revenue base for the Group of SGD 215.2 m. The consolidated net profit after tax was SGD 9.23 m with earnings per share of SGD 4.71 cents. The consolidated EBITDAR was SGD 52.82 m.
The Board believes the financial results are satisfactory. The profits are up 190 % on last year and revenue has increased by 19 %.
DIVIDEND
The Board recognises the importance of rewarding shareholders as the owners of the Company and is therefore recommending that shareholders receive a final dividend payment of 1.10 Singapore cents per share, which represents an increase of 10% over last year's final dividend of 1 Singapore cent. The proposed dividend record date and payment timetable will be announced in due course, along with the Notice of the Company's forthcoming Annual General Meeting ("AGM"), which is
anticipated to be held in November.
ASX QUOTATION AND INTERNATIONAL OPERATIONS
Since the last financial period, the Company successfully applied to have its shares quoted on the Australian Securities Exchange (ASX). This listing enhances the shareholders' investment opportunities in the Company, which is also traded in London on the LSE's Alternative Investment Market (AIM). As at the date of this announcement, we understand that approximately 50% of the shareholders may be considered to be Australian.
TRADING AND OUTLOOK
Skywest continues to provide conventional airline services to all of the major airports in Western Australia and beyond, as it has done for the last 47 years. This regular airline business, whereby scheduled flights are provided and sold to the flying public, continues its organic growth within a relatively stable retail environment. We believe that the scope for growth in this area of the business is significant thus the Airline continues to stimulate the market by expanding its route network, adding regional routes as and when more aircraft become available through new fleet additions or by virtue of adjusted scheduling in accordance with demand.
During the year, the Airline's total fleet size was 17 aircraft but shareholders should note that the fleet size will shortly increase to 18, as an Airbus A320-200 jet aircraft, with larger passenger capacity than the current Fokker aircraft, is in the process of being added to the fleet. The total cost of adding this new type to the Australian Air Operator's Certificate ("AOC") and deploying the new aircraft in the fleet is approximately AUD 3.2 m. The particular A320-200, which is initially being included on the AOC, was previously operated by Thomas Cook in the UK. Cognisant of the risks associated with over-expansion, the Airline otherwise tempered the fleet's growth this year and therefore has not always deployed as many aircraft as it was potentially able. This conservative strategy had a cost impact, namely an increase in cross hire expenses.
Additionally, an agreement with CITIC Pacific Mining Management Pty Ltd ("CITIC Pacific Mining") was reached for a scheduled airline service between Perth and Karratha for employees of CITIC Pacific Mining. The Agreement's scope of services and revenue may increase should additional services be required and scheduled. The Agreement provides for anticipated revenues to Skywest of AUD 10.4m per year. The Agreement is for an initial term of one year with a term extension option available to CITIC Pacific Mining.
The Airline also reached agreement with Perth's major daily newspaper, The West Australian (ASX: WAN), to distribute copies of the paper, on the same day as printed, throughout Western Australia.
These airfreight services are provided overnight to increase utilization of some of the fleet.
The Airline will continue to see additional resources, charter contracts and route expansion. There is a sense that the resources sector has resumed growth, after the issues around the Resources Super Profits Tax issue have apparently been mitigated.
In response to the Western Australian Government's public invitation, the Airline recently delivered a detailed expression of interest to continue its operations on the regulated coastal network of Western Australia. The Company is willing and able to continue to operate a scheduled airline service to the airports that are subject to this regulation and wishes to maintain its service of the Western Australian communities.
AUSTRALIAN AIR OPERATORS CERTIFICATE (AOC)
The Airline is in the process of adding the A320-200 type aircraft to its AOC. Once CASA approves the addition of this aircraft type to the AOC, it is anticipated that the inclusion of further A320-200 aircraft on the AOC will be faster and less costly, thus enabling more fleet expansion opportunities to the Company. This will allow some F100 aircraft to be deployed to alternative routes and allow additional services to be provided to resources clients who wish to utilize the A320-200.
The Airline's AOC was recently amended to include Denpasar, Bali (Indonesia) as a passenger and cargo destination port for its Regular Public Transport Operations. Previously, the Airline was entitled to fly passengers to and from Denpasar on a charter basis only. This extended AOC entitles the Airline to sell commercial, non-charter tickets on routes to that port. The Company understands that, since more than 50% of its shareholder base is Australian, the Airline may be eligible for an Australian International Airline Licence making it possible for the Airline to apply for the inclusion of other international ports in the South East Asian region. To this end, the Airline is now in the process of applying to include the route of Broome-Singapore to its AOC. Furthermore,
the Airline is investigating the addition of other domestic routes, such as from the Pilbara to the East Coast of Australia.
LABOUR AND HUMAN RESOURCES
The Airline recently negotiated Enterprise Bargaining Agreements ("EBA") with its pilot and engineering group of employees. The two EBAs provide labour cost certainty to the Group for a period of 3 years in respect to the pilots and 2 years in respect to the engineers. The Board is pleased the Airline reached consensus with its workforce and anticipates greater productivity and better workplace relations in the coming years. The Company endeavours to maintain secure arrangements and collaboration with its workforce to provide certainty of service to the Airline's customers.
The Airline also enhanced its senior management by hiring two senior executives with airline business focus including an experienced Sales Manager to strengthen the commercial focus of the Airline's management.
RISKS
Risks faced by the business remain the normal commercial risks and typical airline industry related risks. The Company and its shareholders must anticipate a possible slow down in the rate of growth due to the global crisis of confidence in the broader economy associated with the credit institutions. This year has demonstrated the impact of significant rapid changes in exchange rate and fuel costs. These two factors still represent a significant risk to the business. Australian domestic fuel prices, when combined with a lowering in the value of the Australian dollar, cause increased overall costs to the Airline's operations. The Company does attempt to mitigate changes in fuel costs by way of hedging, however, rapid and massive changes can quickly impact the finances of the Group with significant consequences. The policies of the Western Australian Government may impact access to some of the airports that the Airline currently serves. In the worst case, the Government could potentially restrict access to certain ports or introduce unsustainable levels of competition to airports that cannot support competition. Overall, the Board is unable to provide shareholders with any exact guidance about future profit expectations in light of the unstable global economic outlook, uncertain passenger demands, volatile exchange rates and fuel prices that impact on the Airline's business.
I would like to take this opportunity of thanking you, as the shareholders, for your continued support during this exciting but challenging period in the Company's operations and look forward to keeping you updated on the progress of the Group.
In due course, the Company will publish its Annual Report and Notice for the forthcoming Annual General Meeting.
