SKYWEST Airlines said yesterday...
Confidence on finances for Skywest
By Geoffrey Thomas
SKYWEST Airlines said yesterday it was confident it would be able to convince the State Government that the airline's finances were strong enough to warrant a continuation of its monopoly on some routes.
Chief executive Scott Henderson said he expected the company would have the necessary aircraft leases renegotiated by the end of the month and would have a rights issue completed by early next month.
The rights issue and accompanying placement is expected to be worth up to $2 million.
Planning and Infrastructure Minister Alannah MacTiernan warned Skywest last week it would lose its monopoly on some routes if it was unable to secure financing for its five F-50 aircraft and if written assurances were not forthcoming about its ability to pay its debts as they fell due.
Mr Henderson said yesterday these targets would be met. "We have told the Government that we will have a deal in place by the end of April," he said.
Skywest's five F-50s have a book value of $15.3 million, but the airline owes the Commonwealth Bank $13.3 million.
However, that book value is now over six months old and observers suggest the values may be as low as $12 million with the Iraq war and the outbreak of SARS stripping values from airlines and aircraft around the globe.
Analysts in Asia have warned that some of Qantas' 20-year old Boeing 747s and 767s may have to be written off.
The lease on the Skywest aircraft falls due on June 30 and a partial interim payment, due on March 31, was deferred, say airline sources, because it would have triggered the final payout.
Commonwealth Bank is believed to have told Skywest it would agree to renegotiate the leases if the airline was able to raise more equity.
Skywest is planning to raise capital through a rights issue and a placement. Skywest shareholders include chairman Pat Ryan, property developer Clive Hartz and winemaker Franklin Tate.
Paterson Ord Minnett will handle the rights issue.
Late last month Skywest was dealt a blow when respected director and shareholder Mike Calneggia resigned from the board.
Mr Calneggia, whose 6 per cent in the airline is valued at $350,000, did not elaborate on his departure.
However, Mr Calneggia, who was a driving force behind Skywest's recent restructure, was believed to have concerns about other boardroom issues.
Skywest faces significant challenges to stay in the air after posting a six-month loss of $975,000 to December 31.
On the short term radar is litigation with the airline's former chief executive Bill Meeke, who is suing for $1.3 million for breach of contract over his sacking last year.
A planned 7 per cent fare rise to bolster revenues looks questionable.