SkyWest Airlines 2005 Annual Report Download - page 8

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ITEM 1. BUSINESS
General
We are a holding company that operates two independent, wholly-owned subsidiaries, SkyWest Airlines and ASA. SkyWest
Airlines and ASA are regional airlines offering scheduled passenger service with over 2,400 daily departures to 218 destinations in
the United States, Canada, Mexico and the Caribbean. Substantially all of our flights are operated as either Delta Connection or
United Express under code-share arrangements with Delta or United, with significant presence in their key domestic hubs and focus
cities. SkyWest Airlines and ASA provide regional flying to our partners under long-term, fixed-fee code-share agreements. Among
other features of our fixed-fee agreements, our partners reimburse us for specified direct operating expenses (including fuel expense,
which is passed through to our partners), and pay us a fee for operating the aircraft.
SkyWest Airlines and ASA have developed industry-leading reputations for providing quality, low-cost regional airline service
during their long operating histories—SkyWest Airlines has been flying since 1972 and ASA since 1979. As of December, 31, 2005,
our consolidated fleet consisted of a total of 380 aircraft, of which 224 were in service with Delta and 156 were in service with
United. We currently operate one type of regional jet aircraft in two differently sized configurations, the 40- and 50-seat Bombardier
CRJ200 Regional Jet (the “CRJ200”) and the 70-seat Bombardier CRJ700 Regional Jet (the “CRJ700”), and two types of turboprop
aircraft, the 30-seat Embraer Brasilia EMB-120 turboprop (the “Brasilia turboprop”) and the 66-seat Avions de Transport 72-210
turboprop (the “ATR-72 turboprop”). SkyWest Airlines and ASA have combined firm orders to acquire 15 additional CRJ700s and
17 CRJ900s over the next two years and ASA is committed to sublease six additional CRJ200s from Delta commencing in early
2006. In addition, we have options to acquire 70 additional Bombardier Regional Jets over the next two years. We believe the option
aircraft, which range in seating configurations between 50 and 90 seats, position us to capitalize on additional growth opportunities
with our existing and other potential code-share partners.
On September 7, 2005, we completed the acquisition of ASA from Delta for $421.3 million in cash. Additionally, as part of the
purchase, we paid $5.3 million of transaction fees and ASA assumed approximately $1.25 billion in long-term debt. In addition, we
returned to Delta $50 million in deposits that Delta had previously paid on future ASA aircraft deliveries. We believe the
combination of SkyWest Airlines and ASA presents our company with new opportunities for growth through our two
geographically-focused regional airline platforms – SkyWest Airlines in the Western United States and ASA in the Eastern United
States. We now provide the vast majority of regional airline service for Delta in Atlanta, its most important eastern hub, and Salt
Lake City, its most important western hub. In connection with the ASA acquisition, we have established new, separate, but
substantially similar, long-term fixed-fee Delta Connection Agreements with Delta for both SkyWest Airlines and ASA. We also
obtained control of 26 gates in the Hartsfield-Jackson International Airport located in Atlanta, from which we currently provide
service to Delta. Delta has committed to provide to us opportunities to utilize 28 additional regional jets in our fleet by the end of
2007. Delta has also agreed that, starting 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.
We were incorporated in Utah in 1972. Our principal executive offices are located at 444 South River Road, St. George, Utah
84790, and our primary telephone number is [phone]. We maintain an Internet web site at www.skywest.com. Our website
provides a link to the web site of the SEC, through which our annual, quarterly and current reports, as well as amendments to those
reports, are available. In addition, we provide electronic or paper copies of our filings free of charge upon request.
Our Operating Platforms
SkyWest Airlines
SkyWest Airlines provides regional jet and turboprop service in the Western United States with the exception of flying provided
to United out of its Chicago (O’Hare) hub. SkyWest Airlines offered approximately 1,500 daily scheduled departures as of December
31, 2005, of which approximately 1,100 were United Express flights and approximately 400 were Delta Connection flights. SkyWest
Airlines’ operations are conducted from hubs located in Chicago (O’Hare), Denver, Los Angeles, San Francisco, Portland,
Seattle/Tacoma and Salt Lake City. SkyWest Airlines’ fleet as of December 31, 2005 consisted of 42 70-seat CRJ700s, all of which
were flown for United; 123 50-seat CRJ200s, of which 66 were flown for United and 57 were flown for Delta, and 62 30-seat
Brasilia turboprops, of which 48 were flown for United and 14 were flown for Delta. SkyWest Airlines conducts its Delta code-share
operations pursuant to the terms of a Delta Connection Agreement which obligates Delta to compensate SkyWest Airlines for its