SkyWest Airlines 2005 Annual Report Download - page 24

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The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer
potential code-share partners.
The airline industry is highly competitive. We not only compete with other regional airlines, some of which are owned by or
operated as code-share partners of major airlines, but we also face competition from low-cost carriers and major airlines on many
of our routes. Low-cost carriers such as Southwest, JetBlue, US Airways, and AirTran, among others, operate at many of our
hubs, resulting in significant price competition. Additionally, a large number of other carriers operate at our hubs, creating intense
competition. Certain of our competitors are larger and have significantly greater financial and other resources than we do.
Moreover, federal deregulation of the industry allows competitors to rapidly enter our markets and to quickly discount and
restructure fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal costs to
provide service to passengers occupying otherwise unsold seats. Increased fare competition could adversely affect our operations
and the price of our common stock. The airline industry has undergone substantial consolidation, and it may in the future undergo
additional consolidation. Recent examples include the merger between America West Airlines and US Airways in September
2005, and American Airlines’ acquisition of the majority of Trans World Airlines’ assets in 2001. Other developments include
domestic and international code-share alliances between major carriers, such as the “SkyTeam Alliance,” that includes Delta,
Continental and Northwest, among others. Any additional consolidation or significant alliance activity within the airline industry
could limit the number of potential partners with whom we could enter into code-share relationships and materially adversely
affect our relationship with our code-share partners.
Terrorist activities or warnings have dramatically impacted the airline industry, and will likely continue to do so.
The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry in general,
including our operations. The primary effects experienced by the airline industry include a substantial loss of passenger traffic
and revenue. Although, to some degree, airline passenger traffic and revenue have recovered since the September 11th attacks,
additional terrorist attacks could have a similar or even more pronounced effect. Even if additional terrorist attacks are not
launched against the airline industry, there will be lasting consequences of the attacks, including increased security and insurance
costs, increased concerns about future terrorist attacks, increased government regulation and airport delays due to heightened
security. Additional terrorist attacks and the fear of such attacks could negatively impact the airline industry, and result in further
decreased passenger traffic and yields, increased flight delays or cancellations associated with new government mandates, as well
as increased security, fuel and other costs. We cannot provide any assurance that these events will not harm the airline industry
generally or our operations or financial condition in particular.
Rapidly increasing fuel costs have adversely affected, and will likely continue to adversely affect, the operations and
financial performance of the airline industry.
The price of aircraft fuel is unpredictable and has increased significantly in recent periods. Higher fuel prices may lead to
higher airfares, which would tend to decrease the passenger load of our code-share partners. In the long run, such decrease will
have an adverse effect on the number of flights such partner will ask us to provide and the revenues associated with such flights.
Additionally, fuel shortages have been threatened. The future cost and availability of fuel to us cannot be predicted, and
substantial fuel cost increases or the unavailability of adequate supplies of fuel may have a material adverse effect on our results
of operations. During periods of increasing fuel costs, our operating margins have been, and will likely continue to be, adversely
affected.
We are subject to significant governmental regulation.
All interstate air carriers, including SkyWest Airlines and ASA, are subject to regulation by the DOT, the FAA and other
governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA
requires operating, air worthiness and other certificates; approval of personnel who may engage in flight, maintenance or
operation activities; record keeping procedures in accordance with FAA requirements; and FAA approval of flight training and
retraining programs. We cannot predict whether we will be able to comply with all present and future laws, rules, regulations and
certification requirements or that the cost of continued compliance will not have a material adverse effect on our operations. We
incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to
which we are subject. A decision by the FAA to ground, or require time-consuming inspections of or maintenance on, all or any
of our aircraft for any reason may have a material adverse effect on our operations. In addition to state and federal regulation,