Skywest Inc

Case 6 Sky West Inc. and the regional airway manufacturing 1. 3 Business Model 1. network Carriers legacy carriers Hub-and-Spoke 2007 fall in, Northwest, American, Continental Delta 2005 5 82 % 10 0 25. 3 2. minor be Carriers low cost business model point-to-point Southwest JetBlue legacy little apostrophize Low Cost join pipelinelines Low Cost unify Ted airline businesss Delta Low Cost Deltas Song airline businesss 3. regional Carriers Jets legacy Network (Hub-and-Spoke) short-haul flight regional skyways block-hour incentive regional 95 % regional realmal Hub-and-Spoke legacy Regional air passages fellow SkyWest Inc History Origins in the early on 1970s SkyWest Dixie airline business St. George Utah 1972 J. Ralph Atkin 4 Dixies commuter train air lane Atkin Fixed Base Operation (FOB) Air Charters Air Ambulance Service marching music 1972 Atkin SkyWest air ducts 1974 Jerry C. Atkin Ralph Atkins nephew $25,000 Oct 1975 Reorganized 3 SkyWest Expansion in the Late 1970s 1976 Hughes Air West Cedar urban center- common salt Lake City SkyWest Navajo Chieftans 5 National Parks raptus Company Avis Franchises 2 Cedar City St. George. 1977 Interline American airlines ? Check-in Interline SkyWest 1978 1. SkyWest Commuter flight path ( Regional Airline) 3 Certified Air Carrier federal official Government Regulations study Airlines 2. Civil Aeronautics Board (CAB) SkyWest 3 $160,000 varlet azimuth Yuma, Kingman, Prescott, meter canyon, Tucson, Winslow Phoenix, Arizona, Blythe, Los Angeles, and El Centro, California. 3. SkyWest Fairchild Metroliner II $1. 4 ( $150,000) increment from Deregulation, Acquisition, and Affiliations in the 1980s 1978 Major Airlines join, westerly American Airlines Regional Airlines SkyWest 1983 Metros 7 Navajo Chieftans 5 Cessna 207s Charters SkyWest Reagan Reagan Professional Air Traffic Controllers Association 24 Sep 1981 SkyWest Arizona Metro SkyWest 1982 SkyWest 10 Republics Escort 1980s SkyWest Mail, Small Packages, and Bank Documents 10 % 1983 SkyWest 2 Regional Airlines St. George 17 6 250 client Service Aug 1984 SkyWest Las Vegas palm Springs, California Southern California Palm Springs solarise Aire 1968 Borrego Springs, California San Diego 90 1983 Sun Aire 330,000 1985 Sun Aire SkyWest Metros SkyWest 12 14 Sun Aire 28 Sun Aire Facilities American Airlines Los Angeles SkyWest/Sun Aire Major Market SkyWest Regional Carrier 11 Holding Company SkyWest, Inc. , 3 1. SkyWest Airlines Inc. SkyWest Aviation Inc. ) 1998 Regional Airline 5 12 Business Travelers SkyWest Commuter Airline Ski Resorts California SkyWest Airlines Delta Continental Airlines 2. Scenic Airlines Air Tours, General Aviation Scheduled Flights Grand Canyon Arizona, Utah, N evada 3. National Parks Transportation franchise Avis 1985 SkyWest Code-Sharing Western Airline salinity Lake 70% 1987 Delta Airlines Western Airlines SkyWest Delta Code DL SkyWest SkyWest/Sun Aire Western picture Delta community. Logo Code-Sharing Major Regional Airlines 1980 United Airlines Regional United deport American Airlines American Eagle Network 1980 SkyWest Brasilia EMB-120 Turboprop Regional Airlines SkyWest California 1986 Sun Aire acquisition SkyWest NASDAQ 1987 SkyWest Air Transport Worlds Commuter/Regional Airline 500 Regional Airlines 988 SkyWest $2. 3 California 28 Events in the 1990s Jun 1993 Aviation Services West, Inc. Flight Tour Scenic Airlines, Inc. , Las Vegas Grand Canyon Aviation Services West Scenic Airlines, Inc. 1994 SkyWest Delta Salt Lake City 5 Casper, Wyoming Butte, Montana Burbank, California Rapid City and Sioux Falls, South Dakota SkyWest Canadair Regional Jets (CRJs) Bombardier, Inc. Brasilias 50 540 1,200 miles 41,000 Oct 1995 SkyWest Continental Airlines Code-Sharing SkyWest Continental Connection Los Angeles SkyWest 3% Continental Flights 1996 48% Delta 1996 SkyWest 2. 5 16 SkyWest Brasilias 50 Canadair Regional Jets 10 Metroliner 1 Oct 1997 SkyWest United Airlines United Express SkyWest Connecting Flight Los Angeles 1997 SkyWest 25 SkyWest 585 45 12 Salt Lake City Vancouver Canadair Regional Jets 19 Jan 1998 SkyWest United United Express San Francisco Hub United June 1, 1998 1998 SkyWest Connecting flight 3 Major Airlines Delta, United Continental 1 July 2002 SkyWest Tucson Arizona. 8 Dec 2002 United Airlines first mate SkyWest Chapter 11 2003 SkyWest Bombardier CRJ700 70 30 United Express 9 May 2003 SkyWest code-share Continental Airlines SkyWest regional Continental Houston, The US separate of Transportation SkyWest 2003 SkyWest transit SkyWest 1 5 regional carriers circu larise 2004 hub Chicago, IL (ORD) Colorado Springs, CO (COS) CRJ Delta Dallas/ Fort Worth Hub (DFW) SkyWest SkyWest ,000 DOT SkyWest 2004. pic2005 SkyWest, Inc. Atlantic southeastward Airlines Delta Air Lines. Chicago OHare. Sky West Inc. furnish United Delta 2006 bequest 2 2006 SkyWest CRJ900 Dec 2006 SkyWest Inc. SkyWest midwestern United States Partner pic2007 SkyWest Airlines Midwest Connect / Delta Connection / United Express Legacy 2 (Delta Connection / United Express) Outsource 20 SkyWest Inc. Denver, Chicago, Los Angeles San Francisco United express SkyWest Inc. Outsourcing Delta SkyWest Delta Connection Department of Transportation Cedar Utah 8 Jan 2008. Source Annual subject 2007 SkyWest Inc. Skywest Inc. 2. Bridging the Region Gap from West to East SkyWest Inc. Regional Airline Western easterly SkyWest Airlines ASA artner Legacy Airlines safety / on time arrival / divine service and quali ty / fairness and consistency / working together as a team / personal and corporate integrity and maintaining profitability & Efficient character of All Resources. SkyWest Inc. Partner Legacy Airline / Developed industry-leading reputations for providing quality, low-cost regional airline service. 3. ( failal assimilate strategy) pic Inbound Logistics Service , , , nation Handling Equipment, operations Outbound Logistics Marketing and Sales Distribution Legacy Airline Partner reaping Design Service ( practicable Level Strategy) (Competitive Advantage) 3. 1 brilliant power Superior Efficiency SkyWest Inc. Product Design 0. 03 USD 0. 095 USD. Partner Legacy Airline (routine maintenance) Human Resource 90 -Retirement Plans SkyWest Inc. Teamwork Information System Function Interline American Airlines Check-in Republics Escort Marketing Product (Cost per Available throne mile) Place Code Sharing Market Share Partner Legacy SkyWest Inc. 2006 SkyWest Inc. 3,114 2005 1,964 ( Exhibit 6) 3. 2 Superior theatrical role Superior caliber SkyWest Inc. reliability The Aviation Safety Action Program Program Stetson spirit Suite SkyWest Inc. SkyWest Airline Regional Airline 15 2004 2005 SkyWest 84. 5% SkyWest 1% 50% 2006 SkyWest Airlines 1. 2 % 1. 7 % Reliability SkyWest Airlines . 3 Superior inception Process Innovation SkyWest Airline ASA 2 Partner Legacy Airline 3. 4 Superior Customer Responsiveness SkyWest Airlines DOT 2 2003-2004 Functional Strategy SkyWest Inc. Superior Customer Responsiveness Superior Efficiency Product Design Upgrade 0. 103 USD 0. 095 USD. Superior Quality Customer Service 4. (Business Level Strategy) (Functional Level Strategy) . What needs pull up stakes be satisfied? SkyWest Inc. Regional Airline Legacy Airlines partnership 2. Who will be served? Connecting flight Legacy Airlines (Broad Target) 3. How will those needs be satisfied? On-time service with quality. Business Strategy SkyWest Inc. Cost lead Competitive Positioning Efficiency Quality Business vacant (Broad Target) Legacy Airlines partner Western east Customer Services) Business Strategy Functional Strategy Superior Efficiency Superior Quality Superior Customer Responsiveness 5. (Corporate Level Strategy) SkyWest Inc. 1. Concentration Growth Horizontal Growth ASA Partner Legacy Airline Partner Legacy Airline Partner (Contract intellect Term) Intensive Growth Improve Competitive Position Regional Airline 2. Retrenchment Sell-out National Parks Transportation Scenic Airlines Atlantic Southeast Airlines (ASA) pic (Concentration Strategies) 1. Market Penetration SkyWest Inc. Upgrade ( CRJ 50 ) Legacy Airline (Contract Agreement Term) Legacy Airlines 2. Market Develop ment ASA ( ) Eastern Partner Legacy Airline 6. 6. 1 (Organizational Structure) SkyWest Inc. Geographic Structure (Destinations) SkyWest Airline Atlantic Southeast Airline (ASA) Functional Structure Decision Making SkyWest Inc. Centralized ( www. SkyWest. com/ nigh/exec. php , www. flyasa. com , www. SkyWest,Inc. htm ) 6. 2 (Organizational Culture) SkyWest Inc. Efficiency and Quality Efficiency Part meter 3 Ticket Agents / Baggage Handlers SkyWest Airlines $40,000 $202,000 ASA Airlines Quality SkyWest Airline Maintenance Department AMT confront 3 2004 2006 The US Department of Transportation SkyWest 2003 2004 6. 3 (Organizational Leadership) Chairman, President and chief executive officer Jerry Atkin accept the Airline Business magazine award for Regional Airlines Leadership Efficiency and Quality 7. ( strategical Control) 7. 1 Efficiency SkyWest Inc. ASA Delta SkyWest Inc. SkyWest SkyWe st 70 90 50 2007 SkyWest Inc. SkyWest ASA ? ASA Regional SkyWest ASA Cost per available seat pic 7. 2 Quality SkyWest Inc. The US Department of Transportation SkyWest 2003 2004 SkyWest Inc. the Department of Transportation Federal Aviation organization Stetson Quality Suite software SkyWest Inc. ? Partner Legacy Airline 7. 3 Innovation Midwest, Bradford R. Rich , CEO Treasurer SkyWest Inc. SkyWest Midwest ASA Teamwork ? 7. 4 Customer Responsiveness The US Department of Transportation SkyWest 003 2004 Legacy Airlines 8. (strategic Evaluation) 8. 1 Established standards and targets Regional Airline Partner Legacy Airline FAA / DOT TSA Regional Airline Legacy Airline Partner Legacy Airline 8. 2 Create measuring and monitoring musical arrangement Yield/RPM, tax income/ASM, Cost/ASM Miss baggage handling rate 8. 3 canvass actual performance against the established targets ? 8 . 4 Evaluate result and take action if necessary (Statements of Income / Balance Sheets / Air Travel Consumer get over) easuring and monitoring system 9. SkyWest Inc. (Functional Level Strategy) Superior Efficiency Superior Quality Superior Customer Responsiveness Superior Efficiency Product Design 0. 103 USD 0. 095 USD. Superior Quality (Customer Service) (Business Level Strategy) Cost Leadership Competitive Positioning Efficiency Quality Business Leisure (Broad Target) Major Airline Partner (Customer Services) Western Eastern (Corporate Level Strategy) 1. Market Penetration SkyWest Inc. ( CRJ 50 ) Legacy Airline (Contract Agreement Term) 2. Market Development ASA ( ) Eastern Partner Legacy Airline Bridging the Region Gap from West to East Regional Airline Western Eastern Operations Developed industry-leading reputations for providing quality, low-cost regional airline service. 10. (Effectiveness of Strategies) take inability (ROIC) Profit Growth 5 5 5 board get off, ALASKA AIR, EXPRESSJET, crown AIRLINES land AIRWAYS 6 002-2006 Airlines 2002 2003 2004 2005 2006 SKYWEST 86. 87 66. 79 81. 95 112. 27 145. 81 MESA AIR -11. 27 25. 31 26. 28 56. 87 33. 97 ALASKA AIR -118. 60 13. 50 -15. 30 -5. 90 -52. 60 EXPRESSJET 84. 28 108. 18 122. 77 97. 99 92. 7 PINNACLE AIRLINES 30. 79 35. 07 40. 73 25. 70 77. 80 REPUBLIC AIRWAYS 7. 69 36. 14 38. 85 60. 65 79. 51 number 79. 75 284. 98 295. 28 347. 58 377. 05 (Source Annual Report year 2002-2006 ) plot of land 2002-2006 pic SkyWest Inc. SkyWest Inc. 2005 SkyWest Inc. SkyWest Inc. ASA Delta 2005 ASM (Available Seat mile) SkyWest Inc. (rider Revenue) Ground Handling Service Major Airline Partner ASA 2005 SkyWest Inc. 2002 2006 2002 2003 2004 2005 2006 OPERATING REVENUES Passenger 769,427 882,062 1,139, 580 1,938,450 3,087,215 Ground handling and new(prenominal) 5,020 5,964 16,464 25,598 27,441 amount of money direct revenues 774,447 888,026 1,156,044 1,964,048 3,114,656 OPERATING EXPENSES Total run set downs 654,892 779,546 1,011,268 1,743,640 2,775,496 Interest expense 3,611 9,891 18,239 53,330 118,002 2003 2004 2005 2006 OPERATING REVENUES Passenger 14. 64% 29. 19% 70. 10% 59. 26% Ground handling and other 18. 80% 176. 06% 55. 8% 7. 20% Total operating revenues 14. 67% 30. 18% 69. 89% 58. 58% OPERATING EXPENSES Total operating expenses 19. 03% 29. 73% 72. 42% 59. 18% Interest expense 173. 91% 84. 40% 192. 0% 121. 27% 2002 -2003 2004 2002 2006 Airlines 2002 2003 2004 2005 2006 SKYWEST 71. 96% -23. 11% 22. 71% 36. 99% 29. 87% MESA AIR 76. 56% 324. 57% 3. 86% 116. 37% -40. 27% ALASKA AIR -173. 27% 111. 38% -213. 33% 61. 44% -791. 53% EXPRESSJET 75. 31% 28. 36% 13. 49% -20. 18% -5. 4% PINNACLE AIRLINES 116. 10% 13. 91% 16. 13% -36. 90% 202. 74% REPUBLIC AIRWAYS 26. 73% 370. 00% 7. 51% 56. 12% 31. 09% Total 190. 78% 257. 33% 3. 62% 17. 71% 8. 48% Plot 2002-2006 pic SkyWest Inc. 2002-2006 2003 CRJ200s EMB120s ROIC ROIC = Net Profit (After Tax) Invested Capital ? Invested Capital = Total Equity + Total Long-term Debt ( http//finapps. forbes. com/finapps/jsp/finance/compinfo/) (Annual Report) Sky West 2001-2006 ROIC 2002 2003 2004 2005 2006 Net Profit (After Tax) 86,866 66,787 81,952 112,267 145,806 Total Asset 999,384 1,529,210 1,662,287 ,320,646 3,731,419 Total Equity 638,686 709,063 779,055 913,198 1,178,293 Long-Term Debt 125,379 462,773 463,233 1,422,758 1,675,626 Total Invested Capital 764,065 1,171,836 1,242,288 2,335,956 2,853,919 ROIC 11. 37% 5. 70% 6. 60% 4. 81% 5. 11% (Source Annual Report from www. SkyWest. com) RO IC SkyWest Inc. ROIC 5 MESA AIR, ALASKA AIR, EXPRESSJET, PINNACLE AIRLINES REPUBLIC AIRWAYS 6 2002 2006 ROIC Airlines 2002 2003 2004 2005 2006 SKYWEST 11. 37% 5. 70% 6. 60% 4. 81% 5. 11% MESA AIR -5. 67% 8. 14% 3. 87% 6. 99% 4. 44% ALASKA AIR -7. 84% 0. 85% -0. 92% -0. 33% -2. 74% EXPRESSJET 31. 53% 39. 46% 42. 49% 27. 21% 20. 37% PINNACLE AIRLINES 37. 52% 48. 96% 34. 67% 18. 41% 35. 68% REPUBLIC AIRWAYS - 7. 18% 3. 97% 3. 44% 3. 99% Plot pic SkyWest Inc. ROIC 2003, 2005 2006 2003 CRJ200s EMB120s 005 ASA Delta ROIC 2005 ROIC 11. (Problems) SkyWest Airline (Miss baggage handling) Atlantic Southeast Airline Cancel flight (Miss baggage handling) (On-time) ASA 12. (Issues) 1. Partner Low Cost Airlines (South West Airline and Jet Blue) 2. Partner 13. (External Environment Analysis) (External Strategic Factors) (Opportunity) (Threat) (Attractive or Unattractive Industry) 13. 1 General Environment pic a) Economic segment 4 US Inflation rates pic Current Inflation vagabond Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave 2009 NA NA NA NA NA NA NA NA NA NA NA NA NA 2008 4. 28% 4. 03% 3. 98% 3. 94% 4. 8% 5. 02% 5. 60% 5. 37% 4. 94% 3. 66% 1. 07% 0. 09% 3. 5% 2007 2. 08% 2. 42% 2. 78% 2. 57% 2. 69% 2. 69% 2. 36% 1. 7% 2. 76% 3. 54% 4. 31% 4. 08% 2. 85% 2006 3. 99% 3. 0% 3. 36% 3. 55% 4. 17% 4. 32% 4. 15% 3. 82% 2. 06% 1. 1% 1. 97% 2. 54% 3. 24% 2005 2. 97% 3. 01% 3. 15% 3. 51% 2. 0% 2. 53% 3. 17% 3. 64% 4. 69% 4. 35% 3. 46% 3. 42% 3. 9% 2004 1. 93% 1. 69% 1. 74% 2. 29% 3. 05% 3. 27% 2. 99% 2. 65% 2. 54% 3. 9% 3. 52% 3. 26% 2. 68% 2003 2. 60% 2. 98% 3. 02% 2. 22% 2. 6% 2. 11% 2. 11% 2. 16% 2. 32% 2. 04% 1. 77% 1. 88% 2. 7% 2002 1. 14% 1. 14% 1. 48% 1. 64% 1. 18% 1. 07% 1. 46% 1. 0% 1. 51% 2. 03% 2. 20% 2. 38% 1. 59% 2001 3. 3% 3. 53% 2. 92% 3. 27% 3. 62% 3. 25% 2. 72% 2. 72% 2. 65% 2. 13% 1. 0% 1. 55% 2. 83% 2000 2. 74% 3. 22% 3. 76% 3. 7% 3. 19% 3. 73% 3. 66% 3. 41% 3. 45% 3. 45% 3. 45% 3. 39% 3. 8% 1999 Fiscal Year Domestic internationalist Total % change 2006 660. 9 89. 7 750. 6 0. 46 2007 693. 3 75. 8 769. 1 2. 46 2008 713. 8 79. 8 793. 6 3. 19 2009 735. 7 84 819. 7 3. 29 2010 758. 9 88. 3 847. 2 3. 35 2011 782. 6 92. 9 875. 5 3. 4 2012 807. 7 97. 6 905. 2 3. 39 2013 833. 4 102. 3 935. 7 3. 37 2014 860. 5 107. 2 967. 7 3. 42 2015 888. 4 112. 3 1,007. 1 4. 07 2016 917. 7 117. 6 1035. 3 2. 80 2017 848. 4 123. 1 1071. 6 3. 51 Source Forms 41 and 298-C, US Department of Transportation Forecast % Passenger change pic Source RAA Industry Life Cycle Forecast % contain Passenger change Airline Industry 2006 Life cycle Airline Industry Airline Industry Regional Airlines Regional Airlines 1970-2006 Life cycle Regional Airlines ? Industry Life Cycle Growth ) Strategic Groups pic Y Performance Performance Partner Airline Legacy X c) Strategic Types Strategic Type Regional Airline Defender Regional Airline Performance Partner Legacy Airline Regional Airline Legacy Airline FAA TSA DOT Upgrade d) Key Success Factors On Time Schedule Sector Regional Airlines ? Hub Time Elasticity Destinations Regional Airline Cost Regional Airline Partner