What happened

Shares of SkyWest Airlines (NASDAQ:SKYW) soared 18% higher on Friday after the airline posted a first-quarter profit. Airlines have been devastated by the COVID-19 pandemic, with most posting billions in losses in the quarter, but SkyWest's model allowed it to post positive numbers.

So what

After markets closed Thursday, SkyWest reported first-quarter earnings of $0.59 per share on revenue of $730 million. The earnings number is below the $0.91 per-share consensus, but unlike most airlines, at least it was positive.

A Delta airplane on the tarmac.

Image source: SkyWest Airlines.

Alas, there was no magic formula to SkyWest's quarter that other airlines can copy. SkyWest is a so-called regional airline, operating flights on a contractual basis with major airlines instead of flying under its own brand. SkyWest receives compensation for operating flights regardless of how full, or empty, those flights are.

In good times, that can cap revenue and earnings for a regional airline, but in bad times it limits the downside.

SkyWest ended the quarter in a good financial position, with $578 million in cash at quarter's end. The company is set to receive a total of $438 million through the CARES Act government stimulus plan and is burning through less than $1 million per day.

Now what

SkyWest cannot escape the business cycle forever. The company's airline partners are suffering massive losses, and with traffic down 90% or so year over year schedules are being cut drastically. That is going to impact regional flying as well.

Delta Air Lines is set to remove 55 small jets operated by SkyWest as contracts expire throughout the year, including 36 planes that SkyWest owns outright. Overall, SkyWest expects its block hours, or aircraft utilization, to decline 60% or more in the second quarter. The company also has to be mindful to work with its partners the best it can, to sustain strong relationships for when travel eventually picks up again.

But even if the profitability cannot be sustained, SkyWest looks well positioned to survive a difficult period for airlines. That alone is enough to get investors excited about the shares today.