SkyWest Airlines 2005 Annual Report Download - page 13

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• if the other party files for bankruptcy, reorganization or similar action (subject to limitations imposed by the
U. S. Bankruptcy Code) or if either party makes an assignment for the benefit of creditors; or
• if SkyWest Airlines fails to maintain competitive base rate costs (provided that SkyWest Airlines has the right
to adjust its rates prior to any such termination).
ASA Delta Connection Agreement
ASA and Delta are parties to a Second Amended and Restated Delta Connection Agreement, dated as of September 8, 2005
(the “ASA Delta Connection Agreement”). As of December 31, 2005, ASA operated 35 CRJ700s, 106 CRJ200s and 12 ATR-72
turboprops for Delta under the ASA Delta Connection Agreement. We expect to remove the 12 ATR-72 turboprops from the
ASA fleet and return them to Delta by August 2007. ASA operates these aircraft to provide Delta Connection service between
Delta hubs and destinations designated by Delta. As of December 31, 2005, ASA was operating more than 850 Delta Connection
flights per day between Atlanta, Cincinnati, Salt Lake City and designated outlying destinations. Under the ASA Delta
Connection Agreement, Delta is entitled to all passenger, cargo and other revenues associated with each flight. Commencing in
2008, ASA is guaranteed to maintain its percentage of total Delta Connection flights that it has in 2007, so long as its bid for
additional regional flying is competitive with other regional carriers.
In exchange for providing the designated number of flights and performing ASA’s other obligations under the ASA Delta
Connection Agreement, ASA receives from Delta on a weekly basis (i) reimbursement for 100% of its direct costs related to Delta
Connection flights plus (ii) if ASA completes a certain minimum percentage of its Delta Connection flights, an amount equal to a
certain percentage of the direct costs related to the Delta Connection flights (not including fuel costs). Costs directly reimbursed
by Delta under the ASA Delta Connection Agreement include costs related to fuel, ground handling, and aircraft maintenance and
ownership. The ASA Delta Connection Agreement also provides for incentive compensation based upon ASA’s performance,
including on-time arrival performance and completion percentage rates.
The ASA Delta Connection Agreement terminates on September 8, 2020, unless Delta elects to exercise its option to extend
the term for up to four additional five-year terms. The ASA Delta Connection Agreement is subject to early termination in various
circumstances including:
• if ASA or Delta commits a material breach of the ASA Delta Connection Agreement, subject to 30 days notice
and cure rights;
• if ASA fails to conduct all flight operations and maintain all aircraft under the ASA Delta Connection
Agreement in compliance in all material respects with applicable government regulations;
• if ASA fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the SkyWest Airlines Delta Connection
Agreement;
• if the other party files for bankruptcy, reorganization or similar action (subject to limitations imposed by the
U. S. Bankruptcy Code) or if either party makes an assignment for the benefit of creditors; or
• if ASA fails to maintain competitive base rate costs (provided that ASA has the right to adjust its rates prior to
any such termination).
SkyWest Airlines United Express Agreement
SkyWest Airlines and United are parties to a United Express Agreement entered into on July 31, 2003 (the “United Express
Agreement”). As of December 31, 2005, SkyWest Airlines operated 42 CRJ700s, 66 CRJ200s and 48 Brasilia turboprops under
the United Express Agreement, flying a total of approximately 1,100 United Express flights per day between Chicago (O’Hare),
Denver, Los Angeles, San Francisco, Portland and Seattle/Tacoma and designated outlying destinations. Generally, under the
United Express Agreement, United retains all air fares, cargo rates, mail charges and other revenues associated with each flight.