Skywest Inc

Case 6 flick westbound Inc. and the regional air lane assiduity 1. 3 Business Model 1. Network Carriers legacy carriers Hub-and-Spoke 2007 United, Northwest, American, Continental Delta 2005 5 82 % 10 0 25. 3 2. Low bell Carriers low cost business model point-to-point Southwest JetBlue legacy Low Cost Low Cost United air lanes Low Cost United Ted Airlines Delta Low Cost Deltas Song Airlines 3. officeal Carriers Jets bequest Network (Hub-and-Spoke) short-haul flight regional Airlines block-hour incentive Regional 95 % Regional Regional Hub-and-Spoke bequest Regional Airlines married person SkyWest Inc History Origins in the Early 1970s SkyWest Dixie Airline St. George Utah 1972 J. Ralph Atkin 4 Dixies Commuter Airline Atkin Fixed Base Operation (FOB) Air Charters Air Ambulance Service baffle 1972 Atkin SkyWest Airlines 1974 Jerry C. Atkin Ralph Atkins nephew $25,000 Oct 1975 Reorganized 3 SkyWest Expansion in the Late 1970s 1976 Hughes Air West Cedar City-Salt Lake City SkyWest Navajo Chieftans 5 National Parks shipping Company Avis Franchises 2 Cedar City St. George. 1977 Interline American Airlines ? Check-in Interline SkyWest 1978 1. SkyWest Commuter Airline ( Regional Airline) 3 Certified Air Carrier Federal Government Regulations Major Airlines 2. Civil Aeronautics Board (CAB) SkyWest 3 $160,000 Page Arizona Yuma, Kingman, Prescott, Grand Canyon, Tucson, Winslow Phoenix, Arizona, Blythe, Los Angeles, and El Centro, California. 3. SkyWest Fairchild Metroliner II $1. 4 ( $150,000) Growth from Deregulation, Acquisition, and Affiliations in the 1980s 1978 Major Airlines United, Western 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 S kyWest 1982 SkyWest 10 Republics Escort 1980s SkyWest Mail, Small Packages, and Bank Documents 10 % 1983 SkyWest 2 Regional Airlines St. George 17 6 250 Customer Service Aug 1984 SkyWest Las Vegas Palm Springs, California Southern California Palm Springs sunniness Aire 1968 Borrego Springs, California San Diego 90 1983 sunbathe 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 gentle wind 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 tune Scheduled Flights Grand Canyon Arizona, Utah, Nevada 3. National Parks Transportation franchise Avis 1985 SkyWest Code-Sharing Wester n Airline Salt Lake 70% 1987 Delta Airlines Western Airlines SkyWest Delta Code DL SkyWest SkyWest/Sun Aire Western Express Delta confederation. Logo Code-Sharing Major Regional Airlines 1980 United Airlines Regional United Express American Airlines American Eagle Network 1980 SkyWest Brasilia EMB-120 turbo-propeller plane 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 Airli nes 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 ally 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 Department of Transportation SkyWest 2003 SkyWest DOT SkyWest 1 5 regional carriers DOT 2004 hub Chicago, IL (ORD) Colorado Springs, CO (COS) CRJ Delta Dallas/ Fort Worth H ub (DFW) SkyWest SkyWest ,000 DOT SkyWest 2004. pic2005 SkyWest, Inc. Atlantic southeastern Airlines Delta Air Lines. Chicago OHare. Sky West Inc. attendant United Delta 2006 Legacy 2 2006 SkyWest CRJ900 Dec 2006 SkyWest Inc. SkyWest Midwest 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 Report 2007 SkyWest Inc. Skywest Inc. 2. Bridging the Region Gap from West to East SkyWest Inc. Regional Airline Western Eastern SkyWest Airlines ASA artner Legacy Airlines safety / on time arrival / service and quality / rectitude and consistency / working together as a team / personal and corporate integrity and maintaining profitability & Efficient Use of All Resources. SkyWest Inc. Partner Legacy Airline / Developed industry-leading reputations for providing quality, low-cost regional airline service. 3. (Functional Level Strategy) pic Inbound Logistics Service , , , Ground Handling Equipment, Operations Outbound Logistics Marketing and Sales distribution Legacy Airline Partner proceeds Design Service (Functional Level Strategy) (Competitive Advantage) 3. 1 choice Efficiency well-made 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 purchasable seat mile) Place Code Sharing Market Share Partner Legacy SkyWest Inc. 2006 SkyWest Inc. 3,114 2005 1,964 ( Exhibit 6) 3. 2 Superior persona Superior type SkyWest Inc. dependability The Aviation Safety Action Program Program Stetson bore 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 Innovation 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 will 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 Leadership Competitive Positioning Efficiency Quality Business Leisure (Broad Target) Legacy Airlines partner Western Eastern 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 Agreement 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 Development ASA ( ) Eastern Partner Legacy Airline 6. 6. 1 (Organizational Structure) SkyWest Inc. Geographic Structure (Destinations) Sk yWest Airline Atlantic Southeast Airline (ASA) Functional Structure Decision Making SkyWest Inc. Centralized ( www. SkyWest. com/about/exec. php , www. flyasa. com , www. SkyWest,Inc. htm ) 6. 2 (Organizational Culture) SkyWest Inc. Efficiency and Quality Efficiency Part metre 3 Ticket Agents / Baggage Handlers SkyWest Airlines $40,000 $202,000 ASA Airlines Quality SkyWest Airline Maintenance Department AMT Award 3 2004 2006 The US Department of Transportation SkyWest 2003 2004 6. 3 (Organizational Leadership) Chairman, President and CEO Jerry Atkin accept the Airline Business magazine award for Regional Airlines Leadership Efficiency and Quality 7. (Strategic Control) 7. 1 Efficiency SkyWest Inc. ASA Delta SkyWest Inc. SkyWest SkyWest 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 Administration 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 system Yield/RPM, Revenue/ASM, Cost/ASM omit baggage handling rate 8. 3 Compare actual performance against the established targets ? 8. 4 Evaluate result and take action if necessary (Statements of Income / labyrinthine sense Sheets / Air Travel Consumer Report) easuring and monitoring system 9. SkyWest Inc. (Func tional 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) get aheadability (ROIC) Profit Growth 5 5 5 MESA strip, ALASKA AIR, EXPRESSJET, PINNACLE AIRLINES REPUBLIC AIRWAYS 6 002-2006 Airli nes 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 add 79. 75 284. 98 295. 28 347. 58 377. 05 (Source Annual Report year 2002-2006 ) Plot 2002-2006 pic SkyWest Inc. SkyWest Inc. 2005 SkyWest Inc. SkyWest Inc. ASA Delta 2005 ASM (Available Seat mile) SkyWest Inc. ( passenger Revenue) Ground Handling Service Major Airline Partner ASA 2005 SkyWest Inc. 2002 2006 2002 2003 2004 2005 2006 OPERATING REVENUES rider 769,427 882,062 1,139,580 1,938,450 3,087,215 Ground handling and other 5,020 5,964 16,464 25,598 27,441 Total operating revenues 774,447 888,026 1,156,044 1,964,048 3,114,656 OPERATING EXPENSES Total operating expenses 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 20 02-2006 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) ROIC 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 Rate 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 International 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 % Demand 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 achievement Performance Partner Airli ne 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