SkyWest Airlines 2002 Annual Report Download - page 38

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Nature of Operations and Summary of Significant Accounting Policies
The Company, through SkyWest Airlines, Inc. (‘‘SkyWest’’), operates a regional airline offering
scheduled passenger service with approximately 1,000 daily departures to 91 cities in 27 states and
Canada. All SkyWest flights are operated as either the Delta Connection or United Express under
code-sharing arrangements with Delta Air Lines, Inc. (‘‘Delta’’) or United Air Lines, Inc. (‘‘United’’).
SkyWest operates as the Delta Connection in Salt Lake City and Dallas Fort Worth and as the United
Express carrier in Los Angeles, San Francisco, Denver and in the Pacific Northwest. Revenues
generated in connection with the code-sharing relationships with Delta and United account for
substantially all of SkyWest’s passenger revenue.
Multiple code-sharing relationships have enabled SkyWest to reduce reliance on any single major
airline code and to enhance and stabilize operating results through a mix of SkyWest controlled flying
and contract flying. On SkyWest controlled flights, SkyWest controls scheduling, ticketing, pricing and
seat inventories and receives a prorated portion of passenger fares. On contract routes, the major
airline partner controls scheduling, ticketing, pricing and seat inventories with SkyWest receiving from
its major airline partner negotiated payments per flight departure and incentives related to passenger
volumes and levels of customer service. Effective January 1, 2002, SkyWest transitioned substantially all
of its controlled flights to contract flying arrangements.
Consolidation
The accompanying consolidated financial statements include the accounts of SkyWest, Inc. and its
wholly owned subsidiaries, SkyWest Airlines and National Parks Transportation, Inc. (‘‘NPT’’)
(collectively the ‘‘Company’’). All significant intercompany accounts and transactions have been
eliminated in consolidation. During the year ended December 31, 2000, the Company sold the
operations of NPT.
Use of Estimates
The preparation of financial statements in conformity with accounting principals generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or
less to be cash equivalents.
Marketable Securities
The Company’s investments in marketable debt and equity securities are deemed by management
to be available for sale and are reported at fair market value with the net unrealized appreciation or
depreciation reported as a component of accumulated other comprehensive income (loss) in
stockholders’ equity. At the time of sale, any realized appreciation or depreciation, calculated by the
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