10 High Risk High Reward Growth Stocks Stocks To Buy

8. SkyWest, Inc. (NASDAQ:SKYW)

Number of Hedge Fund Holders In Q2 2024: 28

SkyWest, Inc. (NASDAQ:SKYW) is a US based regional airline with flights within the US and to Mexico and Canada. The capital intensive nature of its business means that the key factors surrounding the firm’s story are its debt profile, its fleet life and order book, capital expenditure, and operating costs. SkyWest, Inc. (NASDAQ:SKYW) is doing well on nearly all of these. The firm has grown its operating cash flow by 53% between 2022 and 2023. Additionally, SkyWest, Inc. (NASDAQ:SKYW) reduced its debt by $200 million in H1 2024 and it expects to pay $400 million in debt in 2024. The firm’s free cash flow has 162% from 2020 end to H2 2024 TTM primarily as its capital expenditure has been cut in half. These figures make SkyWest, Inc. (NASDAQ:SKYW) a robust and cash healthy entity and it is also gaining regional market share by increasing its fleet of dual class aircraft. The airline plans to become the world’s biggest operator of Embraer aircraft in the world by 2026 through 278 E175 aircraft which are preferred by passengers because of their roomy interior.

SkyWest, Inc. (NASDAQ:SKYW)’s management shared key details for its fleet overhaul during the Q2 2024 earnings call:

“During the last quarter, we announced a new flying agreement for 20 United-owned E175 to replace 20 CRJ200s under our United contract. These aircraft are coming from another United Express carrier, we anticipate that all 20 E175s will be transitioned to SkyWest this year. As of June 30, we had transitioned to 11 of these aircraft. These 20 are in addition to the 21 currently on order, 19 for United, one for Delta and one for Alaska. We expect delivery of five more this year, eight in 2025 and eight in 2026. At the end of 2026, our E175 fleet total will be 278 continuing to solidify SkyWest as the largest Embraer operator in the world. With the addition of the large dual-class aircraft to our fleet, our regional market share has increased to 30% and of the large dual-class aircraft from 23% in 2019.

We are excited about our market share improvement. Let’s shift focus to our CRJ700 fleet which is a valuable asset and an ideal replacement for single-class CRJ200s. The 19 CRJ700s expiring from our American fleet during 2024 will transition to become CRJ550s in our fleet. The first CRJ550 began flying for Delta during July. We anticipate transitioning most of these aircraft to the Delta fleet by the end of 2024. We have approximately 25 additional CRJ700s that have contract expirations in 2025. We are working with our major partners to place these aircraft under prorate and contract flying agreements. With each of the new 19 E175s we received and financed for United, a CRJ700 contract expire simultaneously. By the time these contracts conclude, the debt on the 19 CRJ700s will be fully paid.”