SkyWest and OSI Systems Outline 2025 Results, 2026 Outlooks

SkyWest’s 2025 Earnings and Operating Performance

SkyWest reported 2025 net income of $428 million, or $10.35 per diluted share, with fourth‑quarter net income of $91 million, or $2.21 per diluted share. Total 2025 pretax income reached $506 million, up 31% from 2024 on a 15% increase in block hours, highlighting operating leverage in its regional airline model. Full‑year EBITDA was $982 million, up more than $100 million year over year, while free cash flow exceeded $400 million, supporting fleet investments and balance sheet deleveraging.

Fourth‑quarter 2025 revenue was $1.0 billion, up 8% from $944 million in Q4 2024, but down from $1.1 billion in Q3 2025 due to normal seasonality and the impact of the U.S. government shutdown. Contract revenue totaled $803 million, pro‑rate and charter revenue $167 million, and leasing and other revenue $54 million, the latter boosted by discrete maintenance services for third parties. SkyWest achieved more than 250 days of 100% controllable completion during 2025 and regularly operated over 2,500 daily departures.

Management estimated that mandated flight cancellations tied to the government shutdown reduced Q4 pretax income by about $7 million, or $0.13 per share. Despite this, 2025 cash generation enabled $492 million of debt repayment, part of a roughly $1 billion total debt reduction since the end of 2022, even as SkyWest financed 14 new E175 aircraft in that period. Year‑end 2025 debt stood at $2.4 billion, down from $2.7 billion a year earlier, while cash was $707 million after debt repayment, $214 million of capital expenditures, and $85 million of share repurchases in 2025.

Fleet, Contracts, and 2026–2028 Capacity Plans at SkyWest

SkyWest announced multi‑year extensions covering 40 E175 aircraft with United and 13 E175s with Delta. These agreements mean there are now no E175 contract expirations until 2028, providing long‑term revenue visibility. The company also has a firm order for 69 additional E175s with Embraer, of which 25 are already allocated to partners—16 to Delta, eight to United, and one to Alaska—and 44 remain unassigned, giving SkyWest flexibility to match future demand. Delivery slots are secured from 2027 through 2032, with deferral and termination options if partner placements are not arranged.

In parallel, SkyWest is redeploying and extending its CRJ fleet. It previously agreed with United to extend up to 40 CRJ200s into the 2030s and continues to build out a 50‑aircraft CRJ550 program, with 27 aircraft in service at year‑end and the remaining 23 expected to enter service during 2026. The company also began a pro‑rate agreement with American Airlines, operating four aircraft with up to nine expected by the end of 2026.

For 2026, SkyWest expects mid‑single‑digit block‑hour growth over 2025, supported by nine new E175 deliveries for United and Alaska, the placement of 23 additional CRJ550s with United, higher aircraft utilization, and the return to service of about 20 parked dual‑class CRJs. These adds will be partially offset by the scheduled return of 19 Delta‑owned CRJ900s over the next few years. SkyWest anticipates 2026 capital expenditures of $600 million to $625 million, roughly in line with 2025, and projects 2026 earnings per share in the “mid $11” range, with greater quarterly seasonality than in recent years.

SkyWest Balance Sheet, Shareholder Returns, and Prorate Trends

Over the past two years, SkyWest generated nearly $1 billion in free cash flow, which it used primarily to reduce leverage and strengthen the balance sheet. Net debt and leverage ratios are at their lowest levels in more than a decade, and management estimates it now holds approximately $1.5 billion of unencumbered equipment, a figure expected to grow as E175s are paid down. The company repurchased nearly 850,000 shares in 2025, doubling dollar repurchases versus 2024, and had $213 million remaining under its authorization at year‑end.

Demand for SkyWest’s pro‑rate business remains “extremely strong,” with the carrier citing community support and opportunities to restore service to underserved markets. At the same time, management noted that increased pro‑rate flying and improving utilization are making the company’s earnings pattern more seasonal, with Q1 production expected to be flat to down versus Q4 2025 and Q2–Q3 expected to be the strongest quarters. Maintenance expense is expected to remain at 2025 levels in 2026 as SkyWest continues to bring aircraft out of long‑term storage.

OSI Systems’ Record Q2 2026 Results and Segment Performance

OSI Systems reported record second‑quarter fiscal 2026 revenue of $464 million, up 11% year over year, with its two largest divisions—Security and Optoelectronics and Manufacturing (“Opto”)—delivering double‑digit top‑line growth. Security division revenue rose 15% to $335 million, driven by sharply higher service revenue, increased RF business contributions, and higher aviation product revenue. Excluding a 50% year‑over‑year decline in large Mexico security program revenue, security sales grew 31%, underscoring broad‑based demand.

Opto revenue, including intercompany sales, increased 12% to $113 million, a Q2 record, supported by diversified demand across industries such as medical diagnostics and semiconductors. Company‑wide non‑GAAP adjusted operating margin was 14%, while non‑GAAP adjusted EPS reached a Q2 record of $2.58. Operating cash flow was $62 million for the quarter, and management said fiscal 2026 cash flow may be even stronger, helped by continued collections from Mexico receivables and robust service revenue growth.

Despite strong execution, OSI noted that security bookings were lower than expected in Q2, primarily due to delays in anticipated orders linked to the U.S. government shutdown and push‑outs from some international customers. The company indicated that these high‑probability opportunities remain in the pipeline and expects stronger bookings in the second half of fiscal 2026 as shutdown‑related timing issues resolve.

OSI Systems Backlog, Capital Allocation, and 2026 Guidance

OSI ended the quarter with an approximately $1.8 billion backlog and reiterated confidence in demand for both its security and optoelectronics offerings. In RF solutions, the company highlighted a new international order of about $30 million for naval communications and surveillance systems and participation in the U.S. Missile Defense Agency’s SHIELD IDIQ contract, which has a 10‑year ceiling value of $151 billion across 2,400 awardees. To support anticipated RF growth tied to the U.S. “Golden Dome” initiative and other programs, OSI is expanding its RF manufacturing footprint in Texas.

The company also completed a $575 million convertible notes transaction at a 0.5% coupon, using proceeds to repay revolver borrowings and buy back approximately 547,000 shares at an average price of $267. Net leverage at quarter‑end was about 2.2 times under its credit agreement. OSI raised its fiscal 2026 non‑GAAP EPS guidance to a range of $10.30 to $10.55, implying 10% to 13% year‑over‑year growth, while maintaining its revenue outlook. Management expects Q3 to face the largest year‑on‑year revenue headwind from Mexico contract roll‑offs, with stronger growth anticipated in Q4 as backlog converts.